Chicago Mayor Brandon Johnson is moving forward with an initially estimated $1 billion renovation of vacant downtown buildings in an effort to counter a commercial real estate crisis that has cut sales prices by more than 50%.
The city, run by a progressive Democrat who has been in power less than a year, is working with developers to finalize plans to redevelop buildings along and near LaSalle Street, once known as Chicago’s Wall Street, according to the finance chief of the city. Agent Jill Jaworski. An announcement is expected by summer after high interest rates delayed the project, she said.
Chicago, like many other U.S. cities, has struggled to fill empty offices after the pandemic emptied city centers. Johnson’s move to continue an initiative launched by his predecessor Lori Lightfoot will help combat the vacancy rate in the city’s central business district, which hit a record high in the fourth quarter, according to real estate broker Jones Lang LaSalle.
“It’s taken a little longer to get things moving forward, but we’re working closely with these projects and doing what we can to move them forward,” Jaworski said in an interview Friday. “We expect to see projects announced and underway in the near future.”
Lightfoot, the first Chicago mayor to lose a re-election bid since 1983, first announced plans to repurpose nearly 2.3 million square feet of vacant space – the equivalent of nearly 40 football fields – in September 2022. The future of the so-called LaSalle Street reinvented initiative had been in question since Johnson took over in May.
The mayor has sought to appease the business community after a rocky start fueled by a series of plans to tax the wealthy. Just last week he announced plans to upgrade the Loop, as Chicago’s central business district is known, which will include a Chicago Board of Trade museum. He also gave more than $1 million in grants to six downtown restaurants, including the historic Ceres Cafe, where merchants used to flock in the heyday of the city’s commercial schemes.
Renewal of the city center
“The mayor is committed to rejuvenating and encouraging housing development in the LaSalle Street corridor,” Quintin Primo III, founder of Capri Investment Group, said in an interview last month. His company has proposed redeveloping 111 West Monroe Street with housing and a hotel as part of the initiative.
Before Lightfoot left office, the city had fielded proposals from a group of developers to convert five buildings along LaSalle, Adams and Monroe streets. Jaworski declined to comment on whether all five projects will move forward.
High interest rates have hurt the housing market across the country. In Chicago, fewer than five large office buildings were sold last year, with losses ranging from 50% to 90%, according to the Building Owners and Managers Association of Chicago. The reinvented LaSalle Street projects were not immune.
“The lending environment has changed a lot since they made those proposals and it’s a challenge right now for all real estate developers,” Jaworski said.
It’s not all bad news for Chicago. Distressed buildings have finally started changing hands, and the transformation of the iconic Thompson Center, which takes up an entire city block, into Google’s new office will begin soon.
Scott Henry, managing director of Celadon Partners, a Chicago-based affordable housing developer selected to redevelop 105 West Adams Street, said he was advised to “keep moving forward” and “be ready to go” . The LaSalle Street Reimagined project initially included more than 600 affordable homes.
Vibrant place
The Prime Group, which had proposed renovating two buildings, is moving forward with its plans, says founder Michael Reschke. Final drawings for permits are about to begin, and the company has “adjusted capital requirements to accommodate slightly higher construction costs and higher interest rates,” he said.
Jaworski said plans to revitalize downtown cannot rely solely on traditional office space, even as companies are increasing pressure for workers to return. Chicago also wants to draw people to its theaters, restaurants and other Loop amenities, he said.
“We are very supportive of plans to convert some office buildings to residential to provide affordable housing,” Jaworski said. “Obviously we want downtown Chicago to continue to be a vibrant place.”