Chicago is providing financial support to developers willing to convert aging office towers into residential buildings. This is a new program that could become a test case for other cities looking to promote the remodeling of these offices.
City officials last week offered tens of millions of dollars in grants to replace the LaSalle Street corridor, a landmark office complex that has thrived as Chicago’s business hub for decades. announced to be activated. But since the pandemic, the Strip’s mostly empty streets and towers have come to symbolize the slow pace of its workforce. back in the office building.
Chicago hopes to build 1,000 apartments in the early stages of the program, at least a third of which will be Affordable for low or medium income earnersthe project could start as early as next year.
Chicago Mayor Lori Lightfoot said last week, “We must do everything we can to restore this corridor.
Other state and local governments are watching When converting from office to residential unit Office occupancy in many cities is less than half what it was before COVID-19.
California Governor Gavin Newsom signed a bill last week that would accelerate zoning and allow approval to convert real estate, such as office parks and strip malls, into housing. A task force, organized by New York City Mayor Eric Adams, is studying subsidies, zoning changes, and building code changes that would accelerate these investments. City Planning Commission Chair and Task Force Chief Dan Galodnick said:
Members of Congress have introduced legislation to provide tax credits for conversion projects. Modeled after the Historic Preservation Tax Credit, a business group backing the bill said buildings older than 25 years and “underutilized due to Covid” could benefit. said David Downey, president of the International Downtown Association. .
These programs are healthiest downtown Coming out of the pandemic are mixed residential, office and retail businesses, with the most troubled being primarily all office businesses.
For decades, developers have been remodeling old office and loft buildings downtown, but these projects present challenges that prevent them from proceeding at scale.
Most business districts lack grocery stores, dry cleaners, and other services that residential areas require. Many office buildings, especially those built after World War II with floors wider than a football field, could not be divided into apartments with windows, bathrooms and kitchens without prohibitive costs. you can’t. Projects also typically require changes to city zoning and building codes.
Still, as the pandemic and new workplace patterns have caused office building prices to plummet, conversion projects are starting to look more attractive to developers.
In cities like Washington, D.C., office buildings that were selling for about $500 a square foot before the pandemic are now selling for $200 a square foot, said Post Brothers chief executive officer. Co-founder Michael Pestronk said. His company has completed four of his office conversion projects and is looking for other projects in other cities such as Philadelphia and Washington, DC.
Developers planning to repurpose along Chicago’s LaSalle Corridor will benefit from lower office prices. According to data firm CoStar Inc., three buildings are for sale, and the remaining six or so are either in default on their mortgages or have been foreclosed on.
“There is a very unique opportunity to acquire an affordable property for redevelopment,” said Chicago Deputy Mayor Samir Maekar.
Featured in movies like “Ferris Bueller’s Day Off” and “The Untouchables,” LaSalle Street is best known as the historic home of the Chicago Board of Trade and the city’s largest banks and law firms. Even before the pandemic, when some of the larger tenants moved into new buildings along the Chicago River, the Corridor began to decline.
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The district has been hit hard by weak momentum in the return to offices, slow leasing, and the preference of many recent office tenants for modern buildings with plenty of amenities. Authorities say the corridor has nearly 5 million square feet of vacant commercial space, more than any other part of the central business district.
The office transformation is part of a broader plan to revitalize Chicago’s LaSalle Street, repurposing the building’s lobby for culture and entertainment, and attracting groceries, restaurants and other residential-oriented retailers. It contains.
To help cover the cost of this transformation, the city offers a combination of federal and state tax credits and subsidies. The project is subject to tax-raised financing programs that until recently were primarily used for infrastructure and other public improvements rather than private development.
Mayor Lightfoot said only projects that meet the city’s affordable housing goals are eligible.
“This is not about corporate benefits,” Myker said.
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