It was early September 2001, and Chicago developer John Buck had just put the finishing touches on one of the most successful speculative office projects in his firm's 20-year history.
The 1.3 million-sf, 50-story UBS Tower at One N. Wacker Dr., with its superb location in Chicago's West Loop, efficient floor plates, and high-end amenities, sold out in months (well before project completion), attracting major companies like PriceWaterhouseCoopers and Swiss Bank UBS, the building's anchor tenant. Word on the success of the project had already hit the real estate investment market, and potential buyers were knocking on Buck's door.
The John Buck Co. was well on its way to creating its next smashing success a block south at 111 S. Wacker Dr., releasing a daring design that called for a 40-story glass-clad structure housing spec office space atop a narrow, 120-foot-tall stem that was nothing more than a concrete core and elevator shafts.
This scheme, by local architect Lohan Caprile Goettsch Architects (now Goettsch Partners, Dirk Lohan having left the firm to form a separate entity, Lohan Anderson) and Seattle-based structural engineer Magnusson Klemencic Associates, would maximize the number of office floors at higher levels with the most desirable views; there would be no occupied levels below the 11th floor. Massive, fully exposed diagonal trusses at the stem and roof levels would support the "suspended" office structure and minimize the number of interior columns.
The development was just starting to gain traction in the local spec office market when the terrorists struck on 9/11.
In an instant, the thought of setting up shop in a what was essentially a "building on a golf tee" had potential tenants looking elsewhere for office space, says Daniel B. Jenkins, principal with John Buck who managed the design and construction of 111 S. Wacker.
"The building was structurally sound, but the design made potential tenants nervous," says Jenkins. "We were far along on the design. We had all the major design team members; the only thing we didn't have was an anchor tenant. We decided to stop and retool."
The 53-story, 1.46 million-sf 111 S. Wacker Dr. tower in Chicago (opposite, top) is among a small group of “Class A+” speculative office buildings that are commanding premium lease rates in a soft office market. Key sellers include its prime location along Wacker Drive in the city’s West Loop, on-site parking, column-free floor plates, a conference center, and an elegant, two-story lobby enclosed with an elliptical-shaped vertical cable wall system that maximizes views of Wacker Drive and Monroe Street . Photos: James Steinkamp, Steinkamp/Ballogg Photography
Such is the life of a developer looking to succeed in the often-tumultuous speculative office market. Going back to the drawing board set the project back several months and cost the developer thousands in design and consulting fees.
But reacting to the market, however hasty the move might seem, was perhaps the single most important decision John Buck made during the development of the highly successful 111 S. Wacker building.
Within months, the developer was back pounding the pavement with a more traditional design scheme that included all the must-haves of UBS Tower. The narrow stem was infilled with seven levels of parking and an elegant, two-story, glass-enclosed lobby. The glass curtain wall extended the full height of the 53-story tower, wrapping yet revealing the building's key structural members—notably the V-shaped column transfers near the base. Amenities included a 10,000-sf fitness center, a conference center, efficient, column-free floor plates, and robust, redundant voice/data systems.
Accounting giant Deloitte & Touche quickly signed up as the crucial anchor tenant, taking floors 12–28 and 31. Other major tenants soon followed, including law firm Lord, Bissell & Brook (floors 41–46) and printer RR Donnelley (floors 35–38). All were willing to pay a premium (up to $28.50 sf/year) at a time when cheaper Class A and B office space was abundant throughout the city.
Completed last summer, the 1.46 million-sf tower is among a small crop of new Class A spec office towers in Chicago that are (pardon the pun) bucking the trend. These so-called "Class A+" buildings are experiencing single-digit vacancy rates, despite charging lease rates in the mid-$20 range on average, says Todd Lippman, executive VP in the Chicago office of real estate services firm CB Richard Ellis. The 111 S. Wacker building, for instance, is currently about 90% leased in a market where average office vacancy rates hover in the mid-teens.
These trophy properties have also caught the eye of the real estate investment market. In December, the German investment fund DIFA Deutsche Immobilien Fonds AD paid more than $400 million (about $400/sf) for 111 S. Wacker. The transaction reportedly broke a 15-year-old price record in Chicago.
"This segment of the market is extremely strong," says Lippman, who groups 111 S. Wacker and UBS Tower with the 50-story Hyatt Center at 71 S. Wacker and the 39-story One South Dearborn building to make up the Class A+ universe in Chicago. "Companies want to be in these buildings because of the amenities, floor-plate efficiencies, and floor-to-ceiling windows."
That was certainly the case at 111 S. Wacker. The 27,500-sf floor plates have column-free lease spans of 61 feet in the north-south direction and 50 feet in the east-west direction. All internal columns were pushed out to the perimeter and spaced 40 feet apart to enable an "infinite variety in terms of office layouts," says Steve Nilles, AIA, LEED AP, partner-in-charge for the project with Goettsch Partners.
John Buck Co. went to great lengths to achieve the 27,500-sf floor plates—considered the "sweet spot" in the Chicago office market, says Rafael S. Carreira, VP of development with John Buck.
Early on, the developer purchased the adjacent 14-story 311 W. Monroe building and merged the two zoning parcels. This eliminated the mandated easement between the buildings, enabling the design team to expand the floor plate to the property line. The move added about 2,000 sf to each floor and expanded the lease span by 5.5 feet on each side of the floor plate in the east-west direction.
"That was a big part of the success of the project," says Nilles. "It allowed open-plan tenants like Deloitte & Touche to add an extra row of workstations on each side of the floor. It also allowed the development to compete against buildings with larger floor plates."
The floor plate is ideal for perimeter office users, as well, says Nilles.
The glass curtain wall of 111 S. Wacker Drive extends the full height of the 53-story tower, wrapping yet revealing the building’s key structural members—notably the V-shaped column transfers near the base. Rendering: Goettsch Partners
Designed on a five-foot module, the floor plate can accommodate any combination of 10-, 15-, and 20-foot offices with minimal column interference at the perimeter. The east façade, for instance, can accommodate 18 10-foot perimeter offices with zero column interference. Even the corners are column-free.
"If a law firm is in a typical punched-window office building with a 15-foot module, and 80% of their associate attorney offices are 10 feet wide, some offices will have two windows, some will have one window, and some will have no windows at all," says Nilles. "That's a problem for many perimeter office users, like law firms. Equality is a huge factor in their work culture."
Carreira says the average tenant gained 10–15% in space efficiency. "Some saw efficiencies of 20% or more."
Those types of space gains alone are often enough to justify the higher lease rates of Class A+ buildings, says CB Richard Ellis's Lippman.
"Although they're paying more in rental rates, tenants are getting a higher quality product and a better work environment without dramatically higher costs, because of 10–20% space efficiency gains," says Lippman, who assessed the building for several clients who needed more space than they could get at 111 S. Wacker. "It's a well-located, beautiful asset," says Lippman.
Buck took advantage of unused floor area ratio from 311 W. Monroe to build additional floors at its new neighbor.
A pedestrian connection at level 11 links the two buildings, providing direct access to cheaper Class A office space (about $24 sf/year) should tenants at 111 S. Wacker need to expand operations. "Many large law firms, for instance, may have 10 floors of attorneys, two floors of meeting space, and two floors for administration, which they will place on the lower floors," says Nilles. "In this case, tenants can place the admin space next door at a reduced lease rate."
The conference center is also a space-saver for tenants. Located on the 29th floor, the 10,000-sf facility includes a 250-seat, theater-style auditorium, pre-function space, a food service area, and several breakout conference rooms. All rooms are set up with broadband Internet and voice/data connections. Tenants pay for the rooms on a per-use basis.
"It's is a big benefit for heavy users of meeting space because they don't have to build out large conference rooms within their rentable area," says Jenkins. If that were the case, the price tag for tenants would be hefty, says Jenkins. He estimates construction costs for such a facility at $1 million, plus monthly rent for about 10,000 sf. "That's a lot money, given the base lease rate," he says.
The building was the first structure to achieve a Gold rating in the U.S. Green Building Council's LEED Core and Shell program. Sustainable features include low-VOC paint throughout the core and shell, CO2 monitoring, a high-performance curtain wall exterior, extensive daylighting, and a vegetated roof.
While the green label was a nice draw, Jenkins says it was not a deal-closer. "Most recognize that it's a great benefit, but we did not get more money for it," he says.
Jenkins believes this will not be the case with Buck's next major office development: 155 N. Wacker. The developer, with Goettsch Partners once again its lead designer, will seek LEED CS certification for the planned spec office building, which is expected to reach 50 stories with up to one million sf of office space.
"Now that we're beginning to market the development, we're finding that anchor tenants are not only interested, but many are demanding space have a LEED certification," says Jenkins. "Many companies now have a corporate mandate."
Whether the LEED rating will help garner higher lease rates is unknown. At the very least, Jenkins believes it will help with the leasing velocity.
The building looked much different before 9/11 (first three renderings from left), with massive diagonal columns cradling a 40-story steel-and-glass structure 120 feet off the ground. Local developer John Buck decided to scrap the initial design after prospective tenants expressed concern for the building’s structural bravado in the wake of 9/11. Models: Goettsch Partners
The floor plates have column-free lease spans of 61 feet in the north-south direction and 50 feet in the east-west direction. All internal columns were pushed out to the perimeter and spaced 40 feet apart to maximize space for both open-plan (above) and perimeter office users. Plan: Goettsch Partners