Walgreens plans to exit its space at Chicago’s Old Post Office, with its headquarters remaining in Deerfield, the company confirmed Monday — news that comes shortly after the sale of Walgreens to a private equity firm.
Walgreens will leave the massive, riverfront structure in January, as the company aims to “renew our focus on our stores and customer experience,” said spokesperson Fraser Engerman.
“Our commitment to serving communities across the country begins in our pharmacies and retail locations, and this decision reflects our continued prioritization of those investments,” Engerman said.
Engerman declined to say how many employees now work at the Old Post Office. But Walgreens moved many of its digital and IT employees there in early 2020, making it one of the first tenants in the building after it was renovated into an upscale office property. In 2019, Walgreens said it had leased about 200,000 square feet in the Old Post Office and planned to relocate 1,800 employees there. In 2023, more than 3,500 employees worked at the Deerfield headquarters and at the Old Post Office, combined.
Walgreens was one of many corporate giants, including McDonalds and Motorola Solutions, which before COVID-19, left obsolete suburban campuses for Chicago’s then-vibrant downtown, transforming underused buildings such as the Old Post Office into high tech office centers.
“It was such a big announcement when (Walgreens) said they were leaving Deerfield and coming to Chicago, and it doesn’t seem that long ago, so to reverse such an important decision after only a few years is surprising,” said Dougal Jeppe, executive vice president of Colliers, a commercial real estate firm. “Granted, it’s a new company, and it’s in a world of financial hurt.”
Walgreens’ lease at the Old Post Office, where it has space on the fourth floor, runs through 2032, according to CoStar. It’s not clear if the company can quickly terminate its lease with property owner 601W Cos., or must find other firms willing to sublease the space.
601W Cos. did not immediately return a message seeking comment.
Either way, the empty space won’t be easy to fill, Jeppe said. The downtown office market is struggling with a historically high vacancy rate, and the Old Post Office’s big, open floor plates are most attractive to tech workers, a sector not seeing much growth.
“(The Old Post Office) is a special asset for special tenants,” Jeppe said. “It’s not getting law firms.”
But 601W Cos. should be able to absorb the hit, he added. The 2.3 million square foot Old Post Office is about 99% leased, and Walgreens’ financial troubles seem unique.
“I don’t think this is a harbinger of other companies deciding to go back to Deerfield or Schaumburg,” Jeppe said. “And 601W Cos. have said they are looking to buy other buildings downtown, so they are clearly not hurting.”
Walgreens Boots Alliance was sold in August for $10 billion to private equity firm Sycamore Partners. The sale took the company private and split it into five standalone companies: Walgreens, The Boots Group, Shields Health Solutions, CareCentrix and VillageMD. When the deal closed, a new CEO — Mike Motz, formerly CEO of Staples US Retail — was appointed to lead Walgreens.
Critics of private equity firms’ involvement in health care have worried that the deal could lead to layoffs, further store closures and reduced pharmacy access, though some analysts have said the sale could help to better facilitate a turnaround for Walgreens.
The sale followed years of financial struggles, as Walgreens faced industrywide challenges as well as fallout from an ill-fated attempt to become more of a health care destination by providing primary care services through VillageMD.
Last year, Walgreens announced that it would close 1,200 stores over a three-year span, including in Chicago.
Though the company’s headquarters is still in Deerfield, that presence has also been scaled back in recent years. In 2022, Walgreens put its old headquarters up for sale, ultimately vacating 575,000 square feet of office buildings on 37 acres at 1411-1435 Lake Cook Road.
The company then moved its Deerfield employees to other buildings in Deerfield along I-94.
This story has been corrected to clarify which part of the Old Post Office Walgreens has space in. It has space on the fourth floor.
