Special delivery: Chicago’s Old Post Office threatens to become hip

A rendering shows the exterior of the Old Post Office.

In a few weeks, Chicagoans can start appreciating a metamorphosis happening at the Old Post Office. It’s an example of what vision, nerve and almost a billion dollars can accomplish.

Add to that a dose of luck, but that was probably overdue for a landmark building that sat empty through nearly a quarter century of neglect, impractical schemes and sheer indecision about what to do with vast floors that, when viewed from one end, seemed to stretch to the horizon.

Even as a blight, it’s been an unofficial gateway to downtown, as it spans Ida B. Wells Drive, and traffic to and from the Eisenhower Expressway flows right through it.

The 2.7 million-square-foot colossus – its space equal to three Loop high-rises – deadened development in downtown’s southwest quadrant. To Brian Whiting, CEO of Telos Group, the building’s leasing agency, “It was like a cork” on an expanding Chicago core. Come September, he can pop the cork and celebrate.

That’s when the Old Post Office — and that’s the project’s official name – is due to open for its first tenant, a corporate office of Walgreens, which has leased 200,000 square feet. Development experts said the lease, announced in mid-2018, prompted other companies to consider the building.

A rendering shows an example of space inside the renovated Old Post Office.

Other incoming tenants include Ferrara Candy, the ad agency AbelsonTaylor and meal kit provider Home Chef. Whiting said deals finalized thus far cover 600,000 square feet and that he’s in negotiations for another million square feet. One company, a source said, is close to signing Uber Technologies, but Whiting would not discuss that or any pending deals.

Whiting said that because the building has a property tax exemption as a landmark, he can quote a lower gross rental rate than towers along Wacker Drive.

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The owner, 601W, has had pronounced success with renovating buildings for the tastes of modern office users. It bought the Old Post Office in 2016 for $130 million, and, with backing from JP Morgan Chase, is putting $800 million into a complete rehabilitation and amenities for tenants and the public.

The New York-based firm acquired the property from a secretive British investor, Bill Davies, who scooped it up in 2009 when an exasperated U.S. Postal Service auctioned it. With the U.S. coming out of recession, Davies had no access to capital and the site’s code violations worsened. The 2016 sale came after then-Mayor Rahm Emanuel threatened to acquire the building via condemnation. Davies died around the time the sale closed.

The spur for the building’s turnaround “was the city saying enough is enough and telling ownership that we needed to catch the [economic] cycle,” said Eleanor Gorski, currently the city’s acting planning commissioner who ran the landmarks division under Emanuel. She said that while the property is within a tax-increment financing district, the building improvements will not get a public subsidy. Related infrastructure work along Canal Street does qualify for a subsidy, Gorski said.

Mark Karasick, partner at 601W, declined to be interviewed but said in an email, “Unique buildings like the Old Post Office are hard to find and they can provide the essential character that attracts a progressive workforce.” He was interested in the site as far back as that 2009 auction but felt the bidding got too high then.

With his second chance, he’s taken what was a liability — the vast space — and turned it into a customizable asset suitable for corporate headquarters or tech startups. “You have an entrepreneurial, progressive type of owner who is making significant investments in amenities,” said Brad Serot, vice chairman of the firm CBRE Group, who represented Home Chef in its lease negotiations. He likened the work to the Merchandise Mart, also a classic reinvented.

The Art Deco lobby of the Old Post Office, as seen in 2018, is part of an $800 million restoration.

Improvements will include a first-floor food hall, common areas designed for relaxation and conversation, plus a rooftop with basketball courts and a quarter-mile running track. Pending discussions with the city, the property also will offer enhanced access along the Chicago River. All the mechanical systems are new, as are the 2,200 windows.

To another incoming tenant, the Chicago Metropolitan Agency for Planning, the historic rehabilitation and its proximity to the Union and Ogilvie train stations, helped seal the deal, said Tina Fassett Smith, its principal for communications. The publicly funded agency is moving from Willis Tower in September 2020.

She said CMAP, as an early tenant, had its choice of prime spaces and is leasing a section that includes what was the suite for Chicago’s postmaster. “We’re planners here, so the reuse of existing infrastructure is really our bread and butter. It’s exciting to see the investment around the transportation hubs,” Fassett Smith said.

The building used to be mentioned as a casino candidate, but Whiting said that is out of the question.

In decades past, potential developers would sketch out a mix of uses that were sometimes incompatible. They strayed into the bizarre — a water park, auto mall or a mausoleum.

The bet by 601W could still end badly, as the building has a lot of space to rent. But in the jaded world of real estate, it’s looking awfully like a miracle.