Citadel's Chicago Exit: A New Chapter in Miami

Citadel, the hedge fund of billionaire Ken Griffin, is negotiating to leave its namesake Chicago skyscraper for a much smaller space at 353 North Clark Street in River North, CoStar reported. This move comes as the downtown Chicago office market faces high vacancy rates, and Citadel's exit would add to the empty space at the Citadel Center, while its potential lease at the North Clark Street building would help fill vacancy there.

Bain & Company is also working on a deal to lease the top five floors of the Citadel Center, adding 175,000 square feet to its space, contingent on a buyout agreement with the building's owner, TPG Angelo Gordon, and Citadel. If finalized, the agreement would be one of the largest leases in downtown Chicago in recent years.

Citadel previously occupied more than 500,000 square feet at the downtown tower but has since reduced its footprint to just over 300,000 square feet. The hedge fund's move to a smaller space in River North is part of a broader trend of the company scaling back its presence in Chicago, following its relocation of headquarters to Miami in 2022.

The move to the River North office tower will help fill the space left vacant after real estate investment trust Ventas relocated to 300 N. LaSalle St. Additionally, it comes as Mesirow, a longtime tenant of the building, downsized its space through a 10-year lease extension. This deal would be a big leasing win for Chicago-based real estate firm Heitman, which owns the 1.2 million-square-foot office tower at 353 N. Clark.

Citadel's move to a smaller space in River North may have several implications for the company's culture and operations. A smaller, more compact workspace can foster closer collaboration and communication among employees, potentially leading to increased innovation and productivity. This is especially true if the new space is designed with collaboration in mind, featuring open floor plans, shared workspaces, and modern amenities. Additionally, a smaller office space typically means lower rent and operational costs, which can help the company reduce expenses and potentially reinvest those savings into other areas of the business.

The relocation of Citadel's employees from Chicago to Miami will have a significant impact on the Chicago real estate market, particularly in the downtown area. Citadel's exit from the Citadel Center at 131 S. Dearborn St. will add to the empty space in the building, which is already over 23% vacant (CoStar data). This will increase the vacancy rate in the downtown office market, which was already high at 26.3% in the fourth quarter of 2022.

Citadel's move to a much smaller space at 353 N. Clark St. in River North will help fill some of the vacancy there, but the overall impact on the downtown office market will be negative. The high vacancy rates in the downtown area may make it more difficult for landlords to attract new tenants, as potential tenants may be hesitant to commit to long-term leases in a market with high vacancy rates and uncertain economic conditions.

The impact of Citadel's relocation on other businesses in the region is less clear. On one hand, the departure of a major employer like Citadel could lead to a decrease in demand for goods and services in the downtown area, potentially hurting local businesses. On the other hand, the increased vacancy rates in the downtown office market could lead to lower rents, making it more affordable for other businesses to lease space in the area.

In conclusion, Citadel's move to a smaller space in the River North neighborhood is a strategic decision that can help the company reduce costs, attract and retain talent, foster collaboration and innovation, and maintain flexibility and adaptability in the face of changing business conditions. However, the relocation of Citadel's employees from Chicago to Miami will have a significant impact on the Chicago real estate market, particularly in the downtown area, with potential consequences for other businesses in the region.