Rising interest rates and recession concerns have thrown a wrench in a Tishman Speyer office development in Chicago’s in-demand Fulton Market district. Tishman Speyer, the global real estate investment firm, recently canceled plans to buy a development site and build an office tower in the area, the fastest-growing U.S. urban office market.
Tishman Speyer is the second-largest owner of office space in Chicago, owning more than 7.2 million square feet across 8 properties. The Fulton Market, where the deal was planned, has transformed recently from a former meatpacking district to a hot destination for offices. Property records show Tishman Speyer terminated the contract to buy the site on May 31st. It’s unknown how much the firm planned to spend on the site, which the previous owner (Park One) bought for $14 million in 2018.
The cancellation of the development is a high-profile example of how challenging it has become to secure financing for real estate deals. Developers and investors are facing higher borrowing and construction costs, leading to some transactions being stalled or scrapped. Office developments are becoming even more complicated, especially in gateway cities like Chicago. In addition to rising interest rates and inflation, the popularity of hybrid work and pushback to return-to-office plans means more stalled or canceled office developments could be on the horizon.