United Airlines extends HQ lease at Willis Tower
March 13, 2019
United Airlines will keep its headquarters in Willis Tower for at least another 14 years, after being courted by owners of megadevelopment sites along the Chicago River.
The Chicago-based airline said it has extended its lease in Chicago’s tallest skyscraper until 2033, following a year-and-a-half search for a potential new headquarters campus in Chicago.
United’s decision to stay put takes the airline out of play for developers looking for tenants to kick off some of the biggest mixed-use developments ever proposed in the Chicago.
The company will revamp, in stages, its 850,000 square feet of space on 16 floors of the former Sears Tower. United will add a 30,000-square-foot cafeteria and roof deck on the fourth floor.
United’s lease extension is a sigh of relief for New York-based Blackstone Group, which paid a Chicago-record $1.3 billion for the 110-story tower in 2015 and is in the late stages of a $500 million renovation and expansion.
Amid major upgrades by Blackstone’s EQ Office unit, United looked at several properties where it could have moved its corporate offices and operations center.
The airline gave serious looks to three of the sites that Amazon toured during its well-publicized search for a second headquarters site, according to real estate sources. Those sites were The 78, Related Midwest’s planned 62-acre development along the river between the South Loop and Chinatown; Lincoln Yards, Sterling Bay’s 55-acre plan proposed on the river along Lincoln Park and Bucktown; and the River District, a vision by broadcast company Tribune Media to redevelop 37 acres of riverfront land just north of downtown.
Gavin Molloy, United’s vice president of corporate real estate, declined to confirm which sites the airline considered, but he acknowledged the company’s search was helped by the legwork that developers had already put into trying to landing the Amazon project, dubbed HQ2. United ultimately determined it was more cost-effective to stay at Willis Tower, even after investing hundreds of millions of dollars to renovate its floors, Molloy said.
Having viable development sites created leverage in negotiating the extension in Willis Tower, he said. United had an option to terminate its lease in 2023. “The alternatives that were available clearly helped in the financial negotiation with Willis Tower,” Molloy said.
Willis Tower’s proximity to public transportation was a key factor in remaining, because 65 percent of the company’s Chicago employees live in the suburbs, Molloy said.
United was represented in the search by brokers Molly Carroll, Andrea VanGelder, Kevin Rogers and Alexa Jennings of Jones Lang LaSalle. The landlord is represented by Jamey Dix, Nikki Kern and Jon-David Parcheta of Telos Group.
United, whose lease had been set to expire in 2028, is the largest private office tenant in downtown Chicago, according to JLL.
Naming rights to the tower are not currently available, Molloy said, but he didn’t rule out eventually putting United’s name on the 1,451-foot-tall skyscraper, which was the world’s tallest from 1974 to 1998.
“It’s something that’s been discussed but we’re not making any announcements on that now,” Molloy said.
Sears Tower’s naming rights were sold by a previous owner of the building to London-based Willis Group Holdings (now called Willis Towers Watson) in 2009.
United has been a tenant in Willis Tower for about a decade, and moved its headquarters there in 2013. The company merged with Continental Airlines in 2010.
United plans to redesign its floors in phases from 2020 to 2023, Molloy said. The company will add five interior staircases between some floors. The redesigned space will have fewer walls and more meeting and collaboration areas, he said.
As United reconfigures space, 86 employees from the former headquarters at 77 W. Wacker Drive and 410 workers from another site in Elk Grove Village will join the 4,731 workers currently in Willis Tower, the company said.
United will leave its data center in Elk Grove Village but hopes to sell the rest of the suburban campus, Molloy said.
Private-equity giant Blackstone’s expansion of the lower floors of Willis Tower will create about 300,000 square feet of new restaurant, retail and entertainment space. Tenants already signed include a more than 14,000-square-foot Urbanspace food hall and 55,000 square feet of corporate meeting and events space from Convene.
Near the tip of the skyscraper, there also are expected to be new attractions for the Skydeck.
Willis Tower is home to 15,000 workers daily and more than 1.7 million visitors annually.