Chicago 'fire sale' office deal

A 485,000-square-foot building at 401 South State Street in Chicago sold for $4.2 million after financial distress, even though the same property traded for $68.1 million in 2016. That works out to under $9 per square foot for a downtown landmark a block from Harold Washington Library. (costar.com) The buyer was Marc Calabria, and the seller was the lender that had controlled the property after a default on $47.8 million of commercial mortgage-backed debt. The building had gone dark after Robert Morris University moved out in 2020 and later merged with Roosevelt University. (costar.com) This was not a generic office box from the 1980s. The eight-story structure was designed by William Le Baron Jenney, opened in 1891, started life as the Siegel, Cooper department store, and later spent decades as a Sears store before becoming university space. (costar.com) The reason a landmark can sell this cheaply is that downtown Chicago office demand still has a huge hole in it. Chicago Building Owners and Managers Association data using Placer.ai showed office occupancy plateauing at about two-thirds of 2019 levels. (chicagobusiness.com) That missing one-third of workers shows up in the leasing numbers. Crain’s reported the downtown market lost nearly 2.3 million square feet of tenants over the prior two years, and CBRE put downtown vacancy at a record 28% in late 2025 after more than three years of quarterly highs. (chicagobusiness.com) Chicago now has two office markets at once. CBRE says prime space over 100,000 square feet is getting scarce, with only three large blocks available and no new office deliveries expected before at least 2029, while older commodity buildings keep getting repriced downward. (cbre.com) That split is why a building can be almost worthless as yesterday’s office and still be valuable as tomorrow’s project. Calabria said part of 401 South State could become student or senior housing, and another large section is being planned as a vertical-farming hub with research space, a produce market, restaurants, and a rooftop garden. (costar.com) He is already involved in another Loop conversion at 105 West Adams Street, where a city-backed plan would turn much of the Clark Adams Building into 400 apartments with nearly $68 million in city support. That tells you what buyers are really purchasing in these fire-sale deals: not current rent rolls, but cheap shells in locations where a different use might finally pencil out. (costar.com) The catch is that a $4.2 million purchase price does not mean a cheap finished project. Conversion still has to cover landmark constraints, construction costs, financing, and the hard geometry of old floor plates, which is why distressed sales are showing up before full redevelopment plans do. (costar.com) So the sale is less a one-off bargain than a price discovery moment. In downtown Chicago, the market is starting to say some older office buildings are no longer office buildings with temporary problems; they are future apartments, labs, farms, schools, or demolition sites that just happen to be wearing office façades today. (chicagobusiness.com)