New Residential Towers in Chicago’s South Loop Signal Upturn

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New Residential Towers in Chicago’s South Loop Signal Upturn

By: Troy McMullen
Financial Times (ft.com)

For decades, Chicago’s central South Loop neighbourhood was largely ignored by property developers who turned their gaze to more attractive areas of the city. Characterised mostly by unused warehouses and barren parking lots, the district struggled to attract sustained investment as other areas enjoyed rapid gentrification.

In the late 19th century, the South Loop was lined with mansions belonging to Chicago’s wealthy elite. Today the area comprises a mixture of modest homes, businesses, and cultural attractions including the Art Institute of Chicago, as well as Grant Park, known as “Chicago’s front yard”.

Yet a steadily strengthening property market in the city, led by an expanding economy and tightening housing inventory, is fuelling a rise in new construction that is spilling into the South Loop. New residential projects are planned for the area, including two developments that would potentially alter the skyline of a city accustomed to skyscrapers.

Miami-based developer Crescent Heights has unveiled plans for an apartment tower that will have 76 storeys and almost 800 units. Designed by Rafael Viñoly — the architect behind London’s Walkie-Talkie building — the project will include more than 125,000 sq ft of retail space, making it one of the most ambitious developments in the district for decades.

A few blocks south, a condominium project designed by architect Helmut Jahn is set to rise higher, to 86 storeys, with more than 500 apartment units, according to developers JK Equities and Time Equities. If the tower comes to fruition, it will be the fifth-tallest building in Chicago.

“We’re seeing pretty bold ideas coming to the market,” says Alan Lev, president and chief executive of Belgravia Group, a company with three properties in development. One of its downtown projects, 403 North Wabash, includes 52 units with views of the Chicago river. Prices range from $2m to just under $3m.

The South Loop projects join a flurry of buildings in the planning stages in Chicago. At least 17 projects with a total of more than 1,000 units are in the pipeline, up from five projects and 300 units last year, according to Appraisal Research Counselors, a Chicago real estate consulting firm.

The rise in construction comes after a prolonged lull in new housing projects. A year-long property crash that began in 2009 left many developers reeling and reluctant to invest in expensive new schemes. Many developments stalled or went bust during the crash while others were converted to rentals. Home prices fell 39 per cent between October 2006 and March 2012, according to the Case-Shiller Chicago Home Price Index.

“The building recovery has been slow, that’s for sure,” says Chris Feurer, of Jameson Sotheby’s International Realty. “But we’re seeing steady growth and that’s accelerating as prices rise.”
Chicago home values are up 33 per cent since 2010, according to data from the city’s Multiple Listing Service and Redfin estate agency.
The median price of homes hit $269,000 in August. Now chronically low inventory is impeding sales, says Redfin’s Alex Starace. The number of listed homes for sale fell 13 per cent in the 12 months
to August.

An expanding technology sector is also changing Chicago’s property market. Google and Microsoft are among several firms that have added thousands of jobs to the city, making it one of the fastest-growing places for tech jobs in the country.

According to CBRE, the number of technology positions in the city rose 25.8 per cent from 2010 to 2013.

“Chicago has turned into a Midwest hub for a lot of these tech companies and that’s drawing younger professionals to the city,” says Sean Conlon, chairman of Conlon/Christie’s International Real Estate.

A new 15-storey condominium being developed in the River North neighbourhood — 400 W Huron — includes two to four-bedroom condo units, measuring 2,144 sq ft to 4,091 sq ft. Many have floor-to-ceiling windows, and terraces with up to 550 sq ft of outdoor living space. Prices range from $1.2m to $4m, according to its developers, Smithfield Properties.

The nearby Gold Coast district has long been considered the upper tier of the property market. Dotted with boutiques and restaurants, the area ranks among the country’s most affluent, according to the Multiple Listing Service.

At 20 East Cedar Street, which is in the heart of the district, a five-bedroom duplex with 22ft-high ceilings and wood-burning fireplaces, is on sale for $2.29m through CONLON/Christie’s International Real Estate.

The Lincoln Park neighbourhood also draws wealthy buyers. A tree-lined district with handsome brick terraces and parks, the area is well-known for its boutiques and high-end retailers.
Deno Jeffries, managing broker at RE/MAX Exclusive Properties, says that strengthening sales in these areas, along with the construction boom in the South Loop, underscore how Chicago’s property market is bouncing back from recession.

“The South Loop is seeing the kind of development that was unthinkable a few years ago,” says Jeffries. “Developers are betting this recovery will be much stronger than in years past.”