Turning Chicago’s Loop office buildings into apartments is a challenge
But these properties are among several along the corridor with large floors spanning over 20,000 square feet, which quickly complicates the numbers. Apartments would either have to be long, narrow units to ensure they have windows, or a developer would end up with massive hallways and non-rentable space closer to the heart of the building. Designs in such buildings can be less attractive, reducing the rents they would command, and the more space there is in a building that does not generate revenue, the lower the return on investment when a developer eventually sells the property.
“In most cases, small floor plates are better than large ones,” says Truman Tolefree, whose Rochester, New York-based development company recently purchased a 24-foot vintage office building. floors with 10,000 square foot floor plates at 65 E. Wacker Place. and plans to convert most of the property into apartments.
Many downtown office buildings that have become apartments over the past two decades had small footprints, says Eleanor Gorski, CEO of the Chicago Architecture Center, citing examples such as the iconic Old Colony and Fisher buildings in the South Loop, which are now popular for student accommodation.
Some potential conversions into larger buildings, meanwhile, never materialized: After developers began converting the former Chicago Public Schools headquarters at 125 S. Clark St. into apartments, the historic building was eventually redeveloped into offices “due to difficulty in the floor plate (size) and cost” of a residential renovation, Gorski says.
An office building that has been converted into rental units at 29 S. LaSalle Street — a 216-unit luxury apartment building now dubbed Millennium on LaSalle — opened last year and is nearly 80% leased, offering a potential validation point for other projects. Yet it also highlighted the risk of repurposing old buildings: the developer sought to add a swimming pool and sports ground on the roof, but was well advanced in its planning work when it discovered that the The structure built in 1902 lacked a bracing system necessary to support the In addition, according to FitzGerald Associates Architects Vice President Rick Whitney, the project’s main design officer.
“We had to reinforce the building to do this, and it was a significant effort and cost,” says Whitney, acknowledging that unforeseen conditions usually complicate the redevelopment of older buildings. Still, he says he’s received “a few calls of interest” from developers considering LaSalle Street conversions and expects more. “It’s just about finding the right conditions to make them happen.”
A spokesperson for Millennium on Florida-based LaSalle developer DLC Residential did not respond to a request for comment.
Chicago developer Mike Reschke says there are reasonable ways around the design challenges for office-to-apartment conversions, especially if a building is bought on the cheap. A Reschke firm paid $120 million earlier this year for the largely vacant BMO Harris Bank office buildings along Monroe Street between LaSalle and Clark streets, far less than the $191 million loan that the previous owner borrowed against the properties. After selling the tallest tower to the state of Illinois for new office space, Reschke is now eyeing a $180 million project to turn the top 12 floors of adjacent 23- and 21-story buildings into more than 300 apartments.
Helping make finances work: He plans to solve the buildings’ large floor plate problem by cutting a 3,600 square foot hole in the middle of each of the top 11 floors to create a courtyard, allowing him to build apartments overlooking on the inside. .
Reschke and other developers say government grants and incentives like TIF money and federal historic tax credits are key to making conversions financially feasible, especially if projects are to include affordable units like Hope. Lightfoot. Offering deeply discounted rents on 30% of units reduces future income from the property, reducing the amount of money a developer would be willing to spend on conversion in the first place.
A spokesperson for the city’s planning and development department said in a statement that developers are “already considering viable luxury residential conversion projects with conventional sources of funding” and that the city’s efforts to help bear the financial burden are aimed at ensuring that there are all affordable units.
“Without the city’s resources, the shift from the street to a monoculture of office uses would likely lead to investments in luxury housing that would be less resilient and sustainable than a mixed-income neighborhood environment,” says the communicated.
Tax sweeteners can work, as New York demonstrated in the 1990s. City officials offered dramatic property tax cuts to developers willing to acquire and repurpose older, heavily vacant buildings in the lower Manhattan, which sparked a wave of conversions.
“It’s now one of the fastest growing neighborhoods with the highest density in the city,” says Nathan Berman, managing director of New York-based Metro Loft Developers, which is working on its 18th office-to-residential conversion in New York.
Lightfoot’s push to transform LaSalle Street from a corridor where 85% of retail space is office into a mixed-use neighborhood has a big tailwind at Google, which recently announced a plan to renovate, create thousands of jobs and purchasing from the James R. Thompson Center. The move could attract more businesses downtown, potentially boosting demand for nearby housing.
Planning officials are also looking for a new tool to attract more retailers to LaSalle Street and its surrounding blocks, where many have closed or been unable to pay rent due to traffic-sapping remote work. daily pedestrian crossing downtown. The Lightfoot administration plans to seek City Council approval to offer downtown retailers grants from its Small Business Improvement Fund.
Help can also come from Washington. Congress is considering a bill dubbed the Downtown Revitalization Act to create a new tax credit for office-to-housing conversions in major urban centers, provided that developers agree to give back to the least 20% of affordable units.