In our continuing series of the “Developer’s Guide to Office-to-Residential Conversions,” Milrose Consultants’ permitting experts take a closer look at the exciting progress that’s happening to convert office buildings to new uses in the windy city of Chicago.
Taking the initiative
Similar to New York City and Dallas, Chicago is making big moves to spur office-to-residential conversions. When it comes to adaptive reuse projects, Chicago’s “LaSalle Street Reimagined” is setting the pace as one of the most ambitious efforts of office-to-residential conversions in the country. As part of Mayor Lori E. Lightfoot’s initiative to invest $550 million toward office-to-residential conversions in the LaSalle Street corridor, the Department of Planning and Development (DPD) intends to repurpose millions of square feet of vacant office space into mixed-income residential uses and other public amenities.
Envisioning “LaSalle Street Reimagined”
Once a bustling hub of Chicago’s central business district, the LaSalle Street corridor is now somewhat of a ghost town, with five million square feet of its office space currently vacant. This is mostly due to the pandemic and the need for employees to work from home. Five properties—consisting mostly of pre-World War II historic buildings—were initially selected to receive financial assistance from the city for partial conversion into units that ranged from studio to three-bedroom apartments. Last May, the city narrowed its selection of developers down to five teams that would focus on the projects. Here is how the plan breaks down:
- Repurposing of nearly 2.3 million square feet of vacant space
- Space will be converted into approximately 1,600 new apartments, with 600 of them being “affordable” to households that earn an average 60 percent of the area’s median income
- Collectively, the project represents almost $1 billion in total investments
As the creation of additional affordable housing is the primary focus of “LaSalle Street Reimagined,” the plan encompasses several other goals that will breathe new life into the area. These include:
- Global innovation
- Public realm enhancements
- Neighborhood-oriented amenities
- Historic-building sustainability
Determining suitability and feasibility of office-to-residential conversions
Ask any developer and he or she will tell you that not all office buildings are suitable for conversion, since they were designed differently and not intended for residential use. It is therefore no surprise that underwriting these projects may be difficult since the price of renovating—when compared to building a new structure—costs about as much money. And where the “LaSalle Street Reimagined” project is concerned, many of the buildings have already been classified as being historical and are included on the National Register—with seven buildings designated as Chicago landmarks.
Funding the project
Conversion of these historic buildings will take precedence over newer ones since funding for these projects will mostly come from historic tax credits (HTC), low-income housing tax credits (LIHTC), and public funding through a tax-increment financing (TIF) district. It’s important to note that this public TIF will fund anywhere from between a quarter to almost half the budget in four of the project proposals.
Grant programs are also playing a significant role in the revitalization of the district. Here’s a snapshot of how grants will support new businesses along LaSalle Street:
- A five-million-dollar grant was proposed to the City Council to incentivize new restaurants, cafes, and other neighborhood-oriented businesses in Chicago’s Financial District.
- Chicago’s Small Business Improvement Fund (SBIF) program would provide grants of up to $250,000 to create pedestrian-oriented commercial and cultural use areas from ground level storefronts, lobbies, and former banking floors located between Court Place and Van Buren Street.
- First-time SBIF—which uses TIF revenues to fund building improvement projects in TIF districts—is being made available to building owners and tenants in the downtown area.
- Chicago businesses could receive SBIF grants for up to four projects per building, along with a $50,000 bonus for expanding from a low-or moderate-income neighborhood.
Building a new dream
Historic buildings are winning on the building end as well. These treasured towers have functional details that make them more feasible for conversion where floor plate depth and code calculations are concerned. Since they were built before the advent of air conditioning, these buildings have outside walls and operable windows that allow for light and fresh air—which is a code requirement for Chicago and most large cities. Additionally, their shallow floor plates have more exterior surface area. Newer office buildings, on the other hand, have larger and wider floor plates which makes conversion less feasible since it’s more difficult to use any available floor space. Even more importantly: Newer buildings may not have access to an outside wall or operable windows, which increases the complexity of the project.
105 West Adams Street
Spearheaded by Celadon Partners and Blackwood Group, this project is on the books as a standout among all others. The team proposed $178 million for the redevelopment of this building which, while beautiful, was extremely distressed. Celadon, an affordable housing developer, is seeking funding for the $178 million in the form of tax credits, foundation grants, subsidies, and privately-raised charitable funds. Here are the standout details of the 105 West Adams Street project:
- Redevelopment will create 247 apartments—185 affordable and 62 market-rate units—which equates to 75 percent of affordable units and is more than double the required amount of 30 percent.
- Only project developed by a dedicated affordable housing developer.
- The architects, Blackwood and DesignBridge, are minority-owned businesses.
- Only project of the five that are offering three-bedroom units and a grocery store, which is a rare find in a business district and also a critical feature for low-income families.
- Affordable units will benefit essential workers, hospitality employees, public employees, and entry-level workers, who—up until now—could not afford housing in this area.
- An unattractive terra-cotta exterior will require total revitalization.
111 West Monroe
Considered one of the most challenging of the projects on account of its thick floor plates and lack of operable windows, the proposed revitalization of this three-tower complex is also very exciting. Stantec, the esteemed designer on the project, has creative plans to manage this complicated conversion. Here are two standout details:
- Breaking up the thick floor plate to carve out a 19-story atrium inside the building to allow for natural light to reach the apartments, thus avoiding any altering of the street-facing facades.
- Two floors in the middle of the building will be converted into a world-class spa and a fitness center—complete with an indoor pool and golf simulator.
Developed by the Prime Group and Capri Investment Group, the team will create The Monroe Residences, a mixed-use building from two of the towers for a total budget of $180 million. The Monroe Hotel is also in the plans but will be financed separately by the “LaSalle Street Reimagined” plan.
Here is a snapshot of the proposed plans:
- Building 349 apartments—182 studios, 124 one-bedroom, and 42 two-bedroom units—with 105 of them set aside as affordable housing.
- Building the 226-key Monroe Hotel.
- A meeting/event space on the second floor
- Reopening of The Monroe Club on the roof level to be enjoyed by residents and hotel guests.
- The former mechanical penthouse will be converted into a restaurant that has an outdoor deck and swimming pool.
- A fine dining restaurant is planned for the lobby at the corner of N. LaSalle Street and W. Monroe Street.
- 130 underground resident parking spaces.
Chicago’s “LaSalle Street Reimagined” is just one example of how ingenuity and creativity are at the heart of successful office-to-residential conversions. Moreover, Fulton Market has historically painted a picture of the Windy City’s ever-fluctuating environment. Discover the developmental activity that is redefining the West Loop skyline in our article entitled “The Future of Fulton Market” by clicking here. As the city of Chicago works toward creating a more neighborhood-oriented atmosphere, it’s just a matter of time before other cities follow suit.
Looking to develop in Chicago? For expert advice on how to streamline the permitting process and avoid project delays in Chicago; click here to book a meeting with Casey McCormick, CEO of McCormick Compliance Consulting, a Milrose Company.