WeWork Backs Out Of Fulton Market Leases
WeWork CEO Sandeep Mathrani promised to cut costs at the oversized coworking giant when he took over in February, and that promise just led to a bite out of the Chicago market.
The New York-based company said it was pulling out of two new leases totaling 110K SF at 1155 and 1114 West Fulton St. in the Fulton Market neighborhood, according to Crain’s Chicago Business. These are the first Chicago leases the company has dropped.
Chicago is not alone. Mathrani unveiled a series of cost-cutting measures this year, impacting many markets. He dropped other leases, including a deal for 115K SF at 149 Madison Ave. in Manhattan, sold off noncore assets and laid off employees, among other moves.
A joint venture between Domus Group and Barnett Capital acquired the Fulton Market properties in early 2019, and the future of the former industrial district looked bright. Google, McDonald’s and other influential firms had recently opened splashy new headquarters, and developers were launching new projects to keep up with the demand. By Q1 of this year, more than 2.1M SF was under construction, roughly half the submarket’s then-total inventory of 4.2M SF, according to Colliers International.
WeWork was placing several bets on the Fulton Market neighborhood. Until it pulled out of the 1155 and 1114 Fulton Market buildings, the company had 15 downtown locations totaling more than 1M SF either opened or planned, including 300K SF in Fulton Market, Crain’s reports.
1155 had been a three-story building, but the joint venture combined it with a neighboring three-story building at 1133 West Fulton St. and added a fourth floor. Domus and Barnett will now have to go out and find new tenants in a very different market.
Leasing has slowed due to the coronavirus pandemic just as several development projects in Fulton Market were completed or are approaching the finish line. The submarket’s vacancy rate jumped to more than 22.3% in Q2, up from 15.2% in Q1, Colliers reports.
