Struggling online marketplace Groupon, whose massive River North headquarters were once the nexus of the Chicago tech ecosystem, is moving to the Loop and downsizing to a 25,000-square-foot space in the Leo Burnett building.
In January, Groupon will make the 25th floor of 35 West Wacker Drive its new Chicago home on a 22-month sublease from Publicis, the French parent company of ad agency Leo Burnett, which occupies much of the 50-story office tower.
“Groupon has always had a thriving office culture and this move to a space that is better aligned to our new hybrid working ethos is a great step to kick off 2024 for our Chicago team,” interim CEO Dusan Senkypl said in a statement Tuesday.
Trading in 300,000 square feet at the former Montgomery Ward catalog warehouse for one floor in the Leo Burnett building is a reflection of both the challenging office market and the decline at Groupon, which has been losing money for years and issued a going concern warning in May, signaling the company could be headed for insolvency.
The onetime Chicago tech unicorn, which built its business on daily online deals featuring deep discounts on everything from laser hair removal to kickboxing classes, has been downsizing and retooling amid ongoing revenue declines. In the third quarter, Groupon reported a net loss of nearly $41 million and had about $86 million in cash left as of Sept. 30, according to a filing with the Securities and Exchange Commission.
Revenues for the quarter were $126.5 million, down 12% year-over-year, according to the earnings report.
Senkypl, a Czech investor and Groupon’s largest shareholder, took over as interim CEO in March and has been attempting to execute a turnaround strategy. Step one has been cutting costs, such as terminating the company’s lease at 600 W. Chicago Ave. — two years early — as of January. Groupon paid a $9.6 million penalty to exercise the early termination option, according to SEC filings.
Launched in 2008, Groupon was once the center of the Chicago tech scene. Google tried to buy Groupon for $6 billion in 2010, but investors and co-founder Andrew Mason said no deal. By 2011, Groupon was valued at $25 billion, and the company went public that fall, raising $700 million in the largest tech initial public offering since Google.
The current market cap is about $350 million.
Groupon moved into its headquarters at 600 W. Chicago Ave. in 2010, becoming one the largest tenants at the former Montgomery Ward warehouse and leasing more than 300,000 square feet through January 2026. The entire space was listed for sublease this year.
The company had more than 11,000 employees worldwide at its peak in 2012. It is unclear how many Groupon employees remain in the Chicago area.
Groupon had 2,904 employees worldwide, including 799 in the U.S., at the end of 2022, according to SEC filings. Another 700 employees were laid off during the first quarter, with more cuts reported on LinkedIn as recently as this month.
A Groupon spokesperson declined to comment beyond the emailed statement.
Meanwhile, the broader Chicago office market remains in a deep slump, with companies continuing to shed space in the post-pandemic hybrid work environment. Vacancy in the city’s central business district, including direct and sublease availability, hit a record 28.2% during the third quarter, according to data from real estate services firm Avison Young.
Chicago office buildings have been hovering at about 50% of pre-pandemic occupancy levels, according to the latest weekly reports by Kastle Systems.
Built for Leo Burnett in 1989, the 35 West Wacker office tower encompasses 1.1 million square feet along the Chicago River. The storied Chicago-based ad agency occupies 32 of the distinctive green granite building’s 50 floors, but more than half of that space was put up for sublease earlier this year, according to real estate listings.
A Publicis spokesperson declined to comment Wednesday.
rchannick@chicagotribune.com
Originally Published: November 29, 2023 at 2:37 p.m.
