Sargent & Lundy
Sargent & Lundy (S&L) is one of the leading providers of engineering services to the nuclear electrical power industry. Savills Studley Chicago has assisted S&L for decades, monitoring the volatility in their space needs as the projects and demands of their clients change. We knew it was critical to understand the government’s view and the public’s view on nuclear power, as it could have a major impact on S&L’s growth and space needs.
We also understood that one of S&L’s strategies to maintain their leadership position in the marketplace was to attract and retain top-level talent. Providing employees with a dynamic workplace environment at the most effective cost became an important driver in their real estate evaluation. Effective cost includes not only rent, but also the flexibility to grow and shrink space as needed.
S&L has significantly increased their headcount over the past five years, as the demand for energy increases and electrical utilities continue to invest in cleaner energy solutions and increase capacity. This growth has resulted in rapid expansion for S&L.
Savills Studley Chicago completed a thorough analysis to quantify S&L’s space needs for the future. The next step was to engineer a transaction at the existing building or elsewhere that could satisfy the needs for both the existing occupied space and future growth space. We determined that the additional space required for the next seven years was 150,000 square feet.
As the long-term anchor tenant of the building, we knew that S&L was well positioned to proactively address their lease, but S&L’s flexibility demands made it very difficult for the building to secure long-term financing. Over time, this situation gave us regular opportunities to open up dialogue with ownership based upon S&L’s status as the anchor tenant and the landlord’s periodic refinancing needs.
Savills Studley Chicago negotiated an extension of S&L’s lease that expanded their premises immediately from 300,000 to 400,000 square feet. A condition of the lease was a commitment of an additional 45,000 square feet after years one and two of the lease, bringing their total occupancy to 490,000 square feet.
Negotiated rental terms gave S&L the long-term cost savings and flexibility they needed, including a rental rate reduction of 15%, capital funded by the owner to build in all of the expansion space, contraction rights of 225,000 square feet, expansion rights of 150,000 square feet and multiple termination rights.
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Executive Managing Director
Executive Vice President, Director