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Google looking hard at Merchandise Mart space

Google Inc. is talks for lease as much as 500000 square feet
landmark Merchandise Mart downtown Chicago.  Phoby Scott Stewart/Sun-Times

Google Inc. is in talks for a lease of as much as 500,000 square feet in the landmark Merchandise Mart in downtown Chicago. Photo by Scott Stewart/Sun-Times

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Updated: July 23, 2012 7:15AM

Google Inc. is in talks for a lease of space within the Merchandise Mart that could amount to more than 500,000 square feet, enough to change the landmark building’s identity.

The Mart, which opened in 1930, has through its history been a center for showrooms for companies that market their wares to retailers. Furniture and, more recently, apparel, have formed important segments of its business.

Sources in real estate circles said the Mart, under owner Vornado Realty Trust, is moving it away from its showroom base to a more traditional office building, with a pitch to technology companies.

“They are trying to transition the building to higher credit-quality tenants,” said one person close to the situation. “It would make the building more appealing to buyers and financiers.”

Sources said the Mart’s managers are discussing a deal with Google that would require the building to buy out some leases of showroom operators. Google’s requirement of 500,000 square feet would amount to more than two full floors of the Mart, which has the most rentable space of any building in Chicago.

Mark Falanga, president of Merchandise Mart Properties Inc., which runs the building for Vornado, did not return calls Wednesday. In an interview with the Sun-Times in April, he described an ongoing reorganization of furniture showrooms in the building but denied that full floors are being marketed to new tenants.

Data from research firm CoStar Group Inc. show the Mart with a low vacancy rate of 3 percent, or about 220,000 square feet.

The Mart also has marketed itself as a hub for high-tech companies. It is the home for a 50,000-square-foot incubator for technology startups called 1871, a reference to the Great Chicago Fire that shaped the city’s development.

A Google spokeswoman declined to comment. The company has been shopping for downtown space for employees of Libertyville-based Motorola Mobility, which it has acquired.

Motorola Mobility has about 3,000 employees in Libertyville, and most or all are expected to move downtown.

Chicago’s Kennedy family owned the Mart for most of its life but sold it to Vornado in 1998. The family still owns the vacant Wolf Point property at the Chicago River and Orleans, just west of the Mart, and plans a three-tower residential and commercial complex on the property.

The former Apparel Center, also just west of the Mart, likewise was sold to Vornado in 1998. Vornado sold it in January to Shorenstein Properties LLC for $228 million.

Shorenstein is converting the building to general offices and has evicted its apparel showrooms. Some of the operators have moved across the street to the Mart.

Office tenants in the Apparel Center include the Chicago Sun-Times.

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