Blackstone Properties bet big when it forked over $1.3 billion, the highest price paid for any office building outside of New York, for Chicago’s iconic Willis Tower in 2015. At the time, Blackstone spending that much on a skyscraper (in the literal home of the skyscraper) signaled the strength of the Chicago market. Blackstone had said that it wanted to spruce up the tower’s infrastructure and create an even greater draw for tourists, but as the years marched on and Blackstone poured heaps of money into renovations, it’s clear that Willis Tower is more than a tourist attraction. It’s Chicago’s friendly neighborhood office building, and it’s designed to compete with the couch.
The list of building amenities that the new Willis Tower offers is almost comically long. After a $500 million renovation, the 110-story skyscraper now boasts a wonderland of physical and material comforts for tenants and tourists alike, with 300,000 square feet spread out over five stories of retail, dining, and entertainment. A one-acre grassy park, home to several bee colonies and fully open to the public, sits just a couple stories above street level. Skydeck, the highest observation deck in the United States and a relic of the tower’s original construction, was preserved. But while Skydeck’s iconic views are the same, visitors pass through a multi-million dollar museum to get there.
Though the new Willis Tower is designed to be more welcoming to the public, some of the renovations are for tenants only. The building has 150,000 square feet of space cordoned off to cater to those who work in the tower, providing tenants access to a fitness center, a lounge, two cafes, a bar, and a private club venue.
But all of these perks come at a price. As Blackstone spent heavily to buy and renovate Willis Tower, “massive” doesn’t even begin to describe the investment it needs to recoup (last year’s property tax bill clocked in at $43 million, the highest out of any building in Chicago). “This isn’t a building you’re going to get into and find a discounted, post-pandemic rent,” said Allen Rogoway, managing principal at Cresa Chicago, a commercial real estate agency in the area. Tenants should expect to pay a premium, but Willis Tower is the only building in town with that level of extravagance. Rogoway said that the properties nearby “don’t have comparable amenities.”
In reality, Willis Tower isn’t competing with neighboring properties as much as they are competing with the work-from-home trend. David Moore, Senior Vice President and Portfolio Director at EQ Office, the Blackstone-owned property manager for the building, told Fox 32 Chicago “the home is definitely our biggest competition.”
The pandemic forced the world to rethink how people work, and workers overwhelmingly want to remain at home. While there’s certainly a social draw to returning to the office, many workers only want to go to the office when there are too many distractions at home to get enough work done. In that sense, the idea of going to a library to get work done might be more favorable than a bustling cultural hub of a major city. Willis Tower certainly has enough amenities to attract tenants, but what happens once the novelty wears off? Well, Willis Tower’s answer involves, you guessed it, more amenities. Willis Tower is using tech just as much as recreation to lure people back to the office.
Tech the halls
In the digital age, tech deployment is a competitive differentiator, but it’s all wasted effort if the tech doesn’t suit the needs of the user. Mikki Ward, EQ Office’s Vice president of Real Estate Technology, explained that they conducted research on their customer’s pain points and how technology can help improve their overall experience. “That research, done over the last several years,” said Ward, “led us to understand that we needed to reduce additional touchpoints by bringing tools together all in one app. By creating a portal that both our customers and property team can log into that connects to everything both groups could need, we improved the experience.”
In 2019, three years into Willis Tower’s renovation, EQ announced that it had partnered with tenant experience company HqO to develop a building solutions app just for Willis Tower. But because of the sheer size and scale of the building, the app needed a backbone in order to get each of those solutions to run on the same platform. EQ later partnered with cove, a PropTech firm which made headlines for receiving $10 million in a funding round (which was incidentally led by Blackstone) last month, to provide the operating system.
Ward believes that a modern building experience will ultimately reap a huge return on investment. “What we see across office space is a desire for more seamless connectivity,” she said. “Tenants can feel overwhelmed utilizing multiple apps and technologies to manage their day-to-day needs.” Now, Willis Tower has an app that streamlines the building experience by granting users mobile access control, transit data, the ability to reserve space, retail promotions, and other relevant alerts.
Willis Tower positions itself as a top-tier office building in an office market struggling with high vacancy levels; record high vacancy rates have plagued downtown Chicago for two consecutive quarters. Demand for office space in Chicago may have gone up, but companies aren’t moving into new spaces fast enough to outpace expiring leases and the droves of businesses looking to downsize their office footprint. Crain’sreports that few downtown office properties changed hands during the second quarter as interest rates jumped and fears of a recession spooked some investors.
But the steep investment into amenitizing Willis Tower seems to be paying off. Unlike office buildings in the surrounding area, available space at Willis Tower is filling up with tenants wanting to bring their employees back to the office. Medical firm Abbott Laboratories announced that they would be leasing 100,000 square feet of space from the Tower. IMC, a proprietary trading firm, added 50 percent of space to its office square footage and extended its lease by a decade. Additionally, Catalog, the five-level shopping district inside the Tower, is already 70 percent leased.
Occupancy levels are looking promising too. Though the building’s foot traffic was down 64 percent in early January compared to the same week in 2019, by May, occupancy levels had increased by twenty percent. Granted, May was the month that the ribbon-cutting ceremony celebrating the completion of Willis Tower’s renovation took place, but the increase in leasing activity indicates that occupancy won’t be under pre-pandemic levels for long.
Before Willis Tower was Willis Tower, it was widely known as the Sears Tower, and the original architecture exemplified the then-staggering power of the corporate entity it was named after. Now, in an era where workers have the power to decide where they would like to work, the iconic skyscraper has a friendlier feel. Willis Tower is a testament to the idea that spending big on amenities reaps a huge return on investment as well as a return to the office. As Chicago mayor Lori Lightfoot said at the ribbon-cutting ceremony, “Blackstone has created a blueprint for other landlords to follow on how to create offices where people will be drawn back to work.”