Dutch banking giant ABN Amro’s confirmation that it will build a massive operations center on the edge of the West Loop seems likely to loosen up an extremely tight downtown office market.
ABN Amro said it expects to start work later this year on a twin-tower, $500 million complex on Clinton Street between Washington and Madison streets, across from the Ogilvie Transportation Center Metra station. The first phase of the project, to be completed in 2003, would include a 1.3 million-square-foot tower that would be at least 30 stories tall. The 2.8-acre site is large enough to accommodate a second tower of nearly equal size, to be built at some later date by the Netherlands-based banking conglomerate.
ABN Amro, which owns LaSalle Bank, would not move the Chicago institution from its well-known headquarters at 135 S. LaSalle St. The parent company would also keep its North American headquarters in the classic, Art Deco building.
But the new development would allow ABN Amro to consolidate into a single location trading floors and other offices that are scattered around the Loop. And while that is a smart move for the bank, it could create headaches for the bank’s current landlords, who will have to find tenants for the nearly 900,000 square feet of office space that the bank will vacate.
ABN Amro is just one of four major companies that, beginning in late 2002, will be moving into new developments and leaving large blocks of vacant space in their wake. In addition to Quaker Oats Co.’s move to new headquarters, the other firms bolting for new buildings include Bank One Corp. and Hyatt Corp.
As a result, some experts predict an easing of the current shortage of downtown office space. “Between mid 2002 and mid 2003, there is going to be a heck of a lot of imbalance between supply and demand,” said John Goodman, regional manager of the Chicago office of New York-based tenant representative Julien J. Studley Inc. “But the market is going to start reacting to that in the next six to nine months.”
The overall downtown vacancy rate, which stands at 10.7 percent, could rise by three percentage points, he said.
In addition to consolidating employees into a single location, the new development will also give the bank a chance to upgrade its high-tech capacity, an increasingly important factor in the competitive banking field.
The project’s potential 2.5 million square feet of space is nearly twice what was expected. But Harrison F. Tempest, chairman and CEO, ABN Amro North America, said in an interview that the project would allow the bank to manage its future space needs in a more orderly fashion that it has in the past.
“Our current office locations are really legacies of our past acquisitions,” Tempest said.
The bank, which had been considering moving some of its operations out of the state, said it was negotiating with both Illinois and Chicago to obtain public subsidies. The ABN Amro project would be one block north of the Quaker building, a development financed in part with a $10 million grant from the city.
ABN Amro will own its new complex. The bank’s development team includes Houston-based developer Hines Interests LP and Chicago-based architectural firm DeStefano and Partners.
Tempest would not discuss details of the negotiations with city and state officials for the complex, which will house about 5,000 employees. But the city’s financial assistance appears likely to exceed the $10 million given to persuade Quaker to keep 1,100 jobs in the city.
The new ABN Amro facility will house about 5,000 employees.
“I would hope that it [the financial assistance] would be very substantial, both the mayor and the governor [have shown] strong support for the project,” Tempest said. “But it hasn’t been determined.”
Ald. Walter Burnett Jr., whose 27th Ward includes the site, said he would support public assistance for the project.
“With all the worry about the economy, we can’t afford to lose any jobs,” he said.
ABN Amro plans to gradually vacate offices in three downtown office buildings, where it currently leases nearly 900,000 square feet of space. One of the buildings, 208 S. LaSalle, is owned by Chicago-based Prime Group Realty Trust. The other buildings, at 181 W. Madison St. and 200 W. Monroe St., are owned by separate joint ventures that include Douglas Elliman-Beitler Inc.
The bank also plans to move a 70,000-square-foot call center currently located in the Bell Federal Building, 79 W. Monroe St., which the bank owns.
But J. Paul Beitler, chairman of the Chicago-based real estate firm, said that he is optimistic that other tenants will take over ABN Amro’s space, noting that the bank’s leases in his buildings don’t begin to expire until 2004.
“Bank One and ABN Amro are moving to take advantage of the technological opportunities that aren’t available in existing buildings,” said Beitler, who is co-developing Dearborn Center, a 1.5 million-square-foot building at 131 S. Dearborn St. that is anchored by a new Bank One operations center. “But we still have good growth from the rest of the market.”
