The pending deal is in line with two budding trends in the downtown office market as effects of the pandemic wane and companies call remote workers back to offices: Many tenants are reducing office space, and a growing number are signing sublease deals.
Both are causing headaches for downtown office landlords, which are pleased to see leasing activity picking up again but grappling with the highest downtown vacancy rate on record and tenants shedding space after adjusting to life with many employees working from home.
Crain is set to cut its downtown footprint by more than half from the roughly 54,000 square feet it occupies at 150 N. Michigan Ave.—now dubbed the Crain Communications Building—where its lease is due to expire in March. The company did not disclose terms of its sublease deal, but sources familiar with the agreement said Crain will sign on for the balance of Oracle’s lease term, which expires in 2027. An Oracle spokesperson couldn’t be reached.
“We are committed to giving our employees an ultra-modern, digitally focused and creative workspace that allows for better communication, coordination and collaboration between our teams than ever before,’’ Crain Communications CEO KC Crain said in the statement. “With this move, we are doubling down on our commitment to the city of Chicago. As a trusted and cherished journalism entity that thoroughly covers the business and political landscape here, it is also important our readers and business partners know that we, too, play a vital role in its growing business ecosystem.”
Subleases have been a popular option for companies hunting for downtown office space in recent months, and there are lots of options after a year-plus surge of tenants trying to offload unwanted workspace in the city. There were 5.9 million square feet of central business district offices listed for sublease in early June, 73 percent more when the pandemic began, according to data from brokerage CBRE. Much of the space is attractive, brokers say, because it has been built out in recent years by companies that were pouring cash into trendy offices to attract and retain talent in a tight labor market.
Crain adds to a list of companies including TikTok, Lactalis Heritage Dairy, Farmers Business Network, FUBO Gaming and others that have recently signed or are finalizing subleases.
Crain’s Chicago Business is one of 20 media brands published by Crain, whose portfolio of titles includes Ad Age, Automotive News and several other industry trade magazines. Roughly 100 of the company’s 650 total employees are based out of its Chicago office, which houses newsrooms and business headquarters for Crain’s Chicago and Modern Healthcare and local bureaus of Ad Age and Pensions & Investments.
Crain originally leased more than 63,000 square feet at 150 N. Michigan across 3½ floors, but slightly reduced that footprint by subleasing half of a floor just before the pandemic to freight logistics company Loadsmart.
Now Crain is moving to a two-tower property owned by Chicago developer Sterling Bay, which bought it in 2018 after the previous owner, New York-based 601W, pulled it out of financial distress with a commitment to spend $100 million renovating and leasing it up. Sterling Bay paid $680 million for the property and rebranded it One Two Pru.
“With an updated, modern interior and best-in-class amenities, One Two Pru is perfectly positioned to provide thought-leading companies like Crain Communications with a workplace that inspires for years to come,” Sterling Bay CEO Andy Gloor said in the statement.
Prudential Plaza is 87 percent leased today, according to Sterling Bay. The Crain negotiations come a few months after One Prudential Plaza’s largest tenant—the Chicago Tribune and its Tribune Publishing parent company—moved out, a surprising pivot less than three years after signing a lease for 137,000 square feet in the building. Sterling Bay sued Tribune in January, alleging the publisher owed $4.8 million in unpaid rent at the tower. That complaint is pending in Cook County Circuit Court. A Sterling Bay spokeswoman declined to comment on the matter. A Tribune spokesman couldn’t be reached.
The Crain move will add a new leasing challenge for CBRE Global Investors, the owner of the 41-story building at 150 N. Michigan. Crain is the building’s largest tenant, though CBRE recently snagged a leasing victory when Lake Forest-based business service and technology provider Impact Networking expanded in the building by more than 31,000 square feet to bring its footprint to more than 50,000 square feet. Including Crain, the building is 83 percent leased, according to real estate information company CoStar Group. A CBRE spokesman declined to comment on the Crain move.
David Knight and Craig Braham of Advocate Commercial Real Estate Advisors represented Crain in negotiating the sublease