Dees Stribling, Contributing Editor
Chicago–The residential real estate contraction and then the onset of the Great Recession created some fierce headwinds for condo developers, so much so that in some cases even trophy properties have found themselves delayed or permanently shelved. Yet others, even in the same markets, have survived. Seldom before has the line between winners and losers in for-sale residential development been so stark.
Two 2000s condo projects in downtown Chicago illustrate the pattern. The Chicago Spire, which would have been the tallest building in the country and maybe home to 1,200 condo units, began with considerable promise in 2005. It even had a famed architect, Santiago Calatrava, to give it some extra panache. Later, however, his twisting tall-building plan was scrapped and an alternate two-building plan was floated, but no construction has occurred at the site in about two years. It’s still a hole in the ground near Lake Michigan.
This week, Anglo Irish Bank Corp. filed a $77 million lawsuit against the developer, Shelbourne Development Ltd., asserting that the loans it made to the Shelbourn for the development are in default. The bank expects to be able to take the site from the developer, but beyond that it isn’t clear what’s going to happen there.
“Nothing, for a while,” John Lahey, a principle with Solomon Cordwell Buenz who has designed a number of downtown condo projects, tells MHN. “But it’s a good location. Eventually, the demand for downtown condos will return, and something will be viable on that spot. But I doubt that it will be anything like the earlier proposal.”
By contrast, the recently completed Legacy at Millennium Park, a 72-story condo project in downtown Chicago not only managed to make it out of the ground, but now about 90 percent of the 355 units have been sold or are under contract. Timing was critical, and the difference between the two projects in that regard was slight. Still, Legacy was already under way in 2005 by developer Mesa Development L.L.C. and later had enough momentum to get through the coming crash.
Besides that, the development also has the features a condo project needs to sell. “It’s tough for condos, but the Legacy has managed to do well because of its parkside location and amenities,” says Lahey, who designed the building, which also incorporates the façades of three historic downtown buildings in the modern structure, an interesting design that also counts as an amenity.
Though he says the demand for condos in downtown Chicago will eventually return, Lehey also predicts that the market will be more balanced between rental and for-sale properties during the next up cycle. “There was a boom in condos before the recession, and if you wanted to rent, the thinking was ‘Why rent when you can buy?’ But in the future renting will be recognized again as a legitimate choice for downtown living, and developers will offer it as well.”