Chicago Mayor Brandon Johnson is pushing ahead with a $1 billion renovation of vacant downtown buildings to combat a commercial real estate crisis that has seen sales prices fall by more than 50%.
The city, led by a progressive Democrat who took office less than a year ago, is in talks with developers to hammer out a plan to reuse buildings on and near LaSalle Street, formerly known as Chicago's Wall Street, which has been delayed by high interest rates and is expected to be announced by the summer, said Jill Jaworski, the city's chief financial officer.
Chicago, like many U.S. cities, has struggled to fill empty office space since the pandemic hollowed out its downtown. Johnson's move to continue an effort started by his predecessor, Lori Lightfoot, will help curb vacancy rates in Chicago's central business district, which rose to a record in the fourth quarter, according to real estate brokerage Jones Lang LaSalle.
“It's taken a little while to get things off the ground, but we're working closely with these projects and doing all we can to move them forward,” Jaworski said in an interview Friday. “We're hopeful that we'll see the projects announced and up and running in the near future.”
Lightfoot, the first Chicago mayor to lose reelection since 1983, first announced plans to repurpose about 2.3 million square feet of vacant land — the equivalent of about 40 football fields — in September 2022. The future of the so-called “LaSalle Street Reimagining” has been in doubt since Johnson took office as mayor in May.
The mayor has been trying to appease the business community after a rocky start with a series of wealth-tax plans. Last week, he unveiled plans to revitalize Chicago's Loop, known as the city's central business district, including building a Chicago Board of Trade Museum. He also awarded more than $1 million in grants to six downtown restaurants, including the famed Ceres Cafe, where dealers gathered during the heyday of Chicago's trading floors.
Downtown renovation
“The mayor is committed to revitalizing and encouraging residential development along LaSalle Street,” Quintin Primo III, founder of Capri Investment Group, said in an interview last month. As part of that plan, he has proposed redeveloping 111 West Monroe Street into housing and a hotel.
Before Lightfoot left office, the city adopted proposals from a group of developers to renovate five buildings along LaSalle, Adams and Monroe streets. Joworski declined to comment on whether all five projects would move forward.
High interest rates have hurt real estate markets across the country. Fewer than five large office buildings sold in Chicago last year, and transactions closed at losses between 50% and 90%, according to the Chicago Building Owners & Managers Association. The LaSalle Street Reimagined project was no exception.
“The borrowing environment has changed significantly since these proposals were made and now poses challenges for all property developers,” Jaworski said.
It's not all bad news for Chicago: Dilapidated buildings are finally changing hands, with construction set to begin soon on transforming the iconic Thompson Center, an entire city block, into a new Google office.
Scott Henry, CEO of Celadon Partners, the Chicago-based affordable housing developer selected to renovate 105 West Adams St., said he was encouraged to “keep moving forward” and “be prepared.” The LaSalle Street Reimagining project originally included more than 600 units of affordable housing.
Vibrant place
Prime Group, which has proposed renovating two buildings, is moving forward with the project, said founder Michael Reschke. Final drawings for permitting are coming soon, and the company has “adjusted its capital requirements to account for some increases in construction costs and rising interest rates,” he said.
Joe Worski said that even as businesses increasingly bring workers back, plans to revitalize downtown can't rely solely on traditional office space. Chicago also wants to draw people to the Loop's theaters, restaurants and other amenities, he said.
“We're very supportive of the plan to convert some of the office buildings into residential and affordable housing,” Joworski said. “We obviously want downtown Chicago to remain a vibrant place.”
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