Law Firm Leases 211,000 SF at 321 N. Clark St.

CHICAGO-The largest Downtown office lease of 2002 puts Hines Interests LP ahead of schedule in tackling anticipated rollover at 321 N. Clark St., as well as signaling confidence in a soft rental market, brokers involved in the deal say. Although terms of Foley & Lardner’s 211,000-sf lease were not disclosed, the value of the deal is believed to be more than $70 million based on asking lease rates at the former Quaker Tower.

Following a merger with Hopkins & Sutter last year, Foley & Lardner had 400 employees in 100,000 sf at Three First National Plaza and 120,000 sf in Prime Group Realty Trust’s IBM Plaza. The law firm has another nine years left on an inherited lease at Three First National Plaza while the remaining term is five years at IBM Plaza, two blocks east of 321 N. Clark St. Grubb & Ellis senior vice president Jim Lockhart says about 20% of the new sublease space is committed, most of it at Three First National Plaza.

Despite leaving sublease space, the deal makes a statement in a Downtown market where direct vacancy is 10.7%, but 16.4% in the River North submarket.

“It’s always good when someone in any kind of market makes an investment like this,” Lockhart tells GlobeSt.com. “Whether this trickles down remains to be seen. But it certainly is a sign of confidence.”

Hines Interests’ Ann Tomlinson takes it as a compliment to 321 N. Clark St. and ownership that paid $133 million for an 840,000-sf asset last year, knowing vacancy would tumble from 98% with the departures of namesake tenant Quaker Oats as well as another law firm, Gardner Carton Douglas. Quaker Oats enters its final month before its move to Steve Fifield’s 555 W. Monroe St. in the West Loop, Tomlinson notes, while Gardner Carton Douglas leaves at the end of the year.

However, 81% of the 34-story building’s entire space is now committed to tenants, Tomlinson reports. “We have a number of prospects that we’re working with,” Tomlinson tells GlobeSt.com. “I think it speaks well of the building and of ownership.”

The original schedule called for 321 N. Clark St. to be leased up by the middle of 2004, Tomlinson says, a task that requires finding new tenants for 640,000 sf. “At this point, we’re thrilled to pieces,” she says.

Lockhart notes that in addition to a “competitive” lease rate, the deal includes flexibility to add more space.

Senior vice president Mark Parrish, vice president Gary Gavula and senior associate Brian Atkinson teamed with Lockhart in representing Foley & Lardner while Tomlinson worked with Tom D’Arcy.

While more sublease space two blocks away is not to be taken lightly, Tomlinson says the goal at 321 N. Clark St. is to draw long-term tenants, while the sublease space tends to be shorter term deals.

Lockhart tells GlobeSt.com his client had two other buildings on its final list of candidates, one of them in the Central Loop and the other also-ran a West Loop property.

While Foley & Lardner was in the market for existing space, another law firm may have made its decision. Mayer, Brown, Rowe & Maw reportedly is interested in 11 S. Wacker Dr., where there is signs that the Pritzker family is going ahead with its plans for an office tower that will include space for its Hyatt Corp.