Valor, which is best known for its early backing of Elon Musk ventures Tesla and SpaceX and has more recently invested in fast-growing Chicago companies including Fooda, Cameo and Tock, joins the party of companies moving offices to Fulton Market as the gritty-turned-trendy corridor becomes a hotbed of upscale restaurants and hotels, major corporate offices and, more recently, apartment buildings. The firm also adds to the list of defections from the Magnificent Mile, which has lost major retail tenants during the COVID-19 pandemic but also become less popular in recent years as a destination for traditional office users.
Valor’s deal is a win for a joint venture of New York-based Tishman Speyer and Chicago developer Mark Goodman, which completed the Sangamon Street property without any tenants signed in the midst of a public health crisis that has pummeled demand for workspace. Now the duo has nearly filled the building while downtown office vacancy hovers at an all-time high, having inked previous deals with Tock, agricultural tech firm Hazel Technologies and real estate tech company VTS, among others.
A Tishman Speyer spokeswoman declined to comment when asked about the Valor Equity Partners lease but confirmed the building is 87% leased today. A Valor Equity Partners spokesman did not respond to a request for comment.
The Tishman spokeswoman also declined to comment on a new $26.1 million supplemental mortgage the owners took out on the property last month, according to Cook County property records. That loan from Wells Fargo added to an $81.4 million mortgage the developer borrowed in 2019 to finance construction of the building, records show.
Companies that have signed new office leases during the pandemic have gravitated to newer and recently renovated office buildings during the pandemic, taking advantage of the soft market and hunting for space that will make employees want to show up rather than work from home. Of the 60 companies downtown that signed deals to relocate their offices between mid-2020 and the first quarter of 2022, 85% moved to buildings that were newly built or had recently undergone a major renovation, according to an analysis from brokerage CBRE.
Fulton Market has evolved over the past decade from drawing primarily tech companies to more recently luring prominent professional service firms. Law firm Norton Rose Fulbright recently signed a lease to open its first Chicago office in the neighborhood, while Boston Consulting Group is slated to move from River North to anchor a new office building at 360 N. Green St. from developer Sterling Bay.
Valor’s impending departure from 875 N. Michigan, meanwhile, comes as the Mag Mile tower’s owner looks to reposition a large portion of its office space for medical office use. The private-equity firm’s space is contiguous with several floors that the building’s owner, Chicago real estate firm Hearn, is rebranding as the Mag Mile Medical Pavilion and marketing to private physicians groups and major hospitals that may want to open clinical space in the building.
Hearn President and CEO Steve Hearn said he is finalizing leases with four medical office users totaling around 35,000 square feet and is looking at expanding his vision beyond the 125,000 square feet of medical offices initially planned. “We’ve had a very strong response,” he said.
Valor’s move comes just more than six months after Hearn lost one of his largest tenants in software firm SMS Assist, which recently vacated close to 85,000 square feet in the building when it relocated to a new office in the Prudential Plaza complex at 130 E. Randolph St.
Robert Sevim in the Chicago office of tenant rep brokerage Savills negotiated the Valor Equity Partners lease on behalf of the firm. Tishman Speyer’s Adam Mitchell and Ellen May oversee leasing at 320 N. Sangamon.