Filling Allstate Space No Quick Fix for REIT

CHICAGO-Allstate Insurance Co. has left Trizec Properties Inc. with a 110,000-sf hole to fill at 120 S. Riverside Plaza, and REIT officials say it will likely be 2006 until it is leased to new tenants. The vacancy caused by the consolidation of the insurance company’s Encompass division in its Northbrook headquarters drops occupancy at the 685,000-sf building above Union Station to 82.6%, lowest among the company’s four Chicago assets.

The insurance company ran its Encompass business out of the fifth, sixth and seventh floors of the building, one of three West Loop assets Trizec Properties owns. It owns another 685,000-sf building at 10 S. Riverside Plaza, where occupancy is 87.6%, as well as 550 W. Washington St. With the Allstate space representing about 5% of the REIT’s 2.4-million-sf Chicago portfolio, occupancy at the four properties here is 89.3%, according to the company’s first-quarter earnings report.

“Chicago continues to struggle with the perfect storm of lackluster job growth, the negative impact from recent mergers, high level of construction deliveries and space vacated by tenants moving to those new developments,” says president and chief executive officer Timothy Callahan.

Meanwhile, Trizec Properties is decelerating its efforts to exit non-core markets in favor of holding out for higher prices. One asset held for sale, a 770,000-sf building in Tulsa, OK, is back on the market after the company signed new tenants to leases. “We want to make sure they’re sold for the right value, and not just to sell to say we’ve sold in this environment,” Callahan explains.