Central Business District

from RECGA Member, Michael S. MaRous

As part of the expansion of the Chicago Federal Center, a midsize retail and office building located at a key corner of the Chicago Loop was condemned by the United States government. The General Services Administration (GSA) had been the major tenant of the upper-floor office space. The ground floor, besides providing entry to the upper-floor offices, consisted of several modern retail units. The offer of approximately $11,000,000 by the condemning body was based on its appraiser’s opinion that the building essentially consisted of Class C office space.

MaRous and Company performed an analysis of the retail market, which took into consideration the explosion in the number of college students residing in the Chicago Loop. Over a 15-year period, the college students in the downtown area had grown by 50,000 students, which rendered the subject’s corner Loop location extremely desirable for retail development. In fact, the prime corner retail unit was reflecting one of the highest per-square-foot rents in the entire central business district at nearly $300 per square foot.

In regard to the upper-floor office space, there was a significant issue as to market rent. Taking into consideration the small floor plates, the availability of light and air, and the good-quality location, we found the market rents were slightly below the rate of the expired GSA lease for the upper-floor office space. The appraiser retained by the United States government estimated significantly lower market rents for both the office and the retail space.

At the conclusion of trial, the jury came back with a verdict of approximately $19,000,000, just under our value estimate and nearly double the offer by the United States government.