Plans to convert a portion of La Salle Street office buildings into residential is the type of public-private partnership Chicago developers and architects have been waiting for, despite the hurdles that can occur with adaptive reuse projects.
The La Salle Street Reimagined program, shepherded by former Mayor Lori Lightfoot and continued by Mayor Brandon Johnson’s administration, is an effort to reinvigorate the corridor as it — and other stretches of downtown — grapple with high commercial vacancy rates.
Downtown Chicago’s office vacancy rate topped 21% in the first quarter of 2024, according to commercial real estate firm Bradford Allen. For the same period last year, the office vacancy rate was 19.8%.
The four proposals include 111 W. Monroe, 208 S. La Salle, 30 N. La Salle and 79 W. Monroe streets and represent a combined $528 million in investment, according to Johnson.
He announced in April that he’ll propose the city earmark more than $150 million in tax increment financing assistance for four adaptive reuse projects in the corridor. Earlier this month, Chicago City Council authorized $158.5 million in tax-exempt multifamily housing revenue bonds for 111 W. Monroe and 208 S. La Salle.
Lee Golub, longtime Chicago developer and managing principal of Golub & Co., said the projects couldn’t happen without the city’s support. Golub & Co. is helming the partial conversion of 30 N. La Salle, which stands to receive $57 million in TIF assistance.
“The cost to do this is very close to new construction cost,” Golub said. “Without having the TIF and the public private-partnership and that subsidy, the numbers don’t work.”
By comparison, his firm’s conversion of Tribune Tower into high-end condos was successful without public funding. That’s because its attractive location and top-of-market condo prices don’t pencil the same as a property with a mix of affordable and market-rate apartments.
Adaptive reuse projects like those on La Salle Street are back on the rise in major cities like Chicago, as city officials and housing advocates see it as a way to re-energize empty office buildings fueled by remote work.
But the projects are often cost-prohibitive for developers because older buildings can be plagued with structural issues and office properties — that were never designed for housing — require significant changes from moving elevator shafts to adding windows and plumbing. It’s why cities such as San Francisco, Boston and Chicago have created programs offering incentives to building developers.
Chicago has the third-largest pipeline of future apartment conversions among 20 U.S. cities, according to a May report from RentCafe. It said Chicago is poised to add 4,149 new apartments through adaptive reuse with half coming from the conversion of office buildings.
Converting La Salle Street
The four projects up for TIF assistance include a plan for a hotel and more than 1,000 new apartments with at least 319 expected to have affordable rents. The city projects 1.3 million square feet of vacant space will be converted.
Architects and developers said it will help re-cement La Salle’s status as a historic district and contribute to a wider transformation of the Loop. But not all of the buildings can be converted in the same way.
Solomon Cordwell Buenz CEO Chris Pemberton likens the La Salle buildings to chess pieces. His architecture firm is working with Golub on 30 N. La Salle, where 349 apartments — 105 of them affordable — will be created.
“Each one of them is different,” Pemberton said. “In repurposing them ... we need to think of creative design solutions, founded in practical experience, that allow them to emerge as fully functional buildings and remain as pieces of a set that together form one of Chicago’s most significant and beloved historical districts.”
Compared to the other projects, 30 N. La Salle is much easier to convert and likely the first of the four to come to market, Golub said.
The 1975 high-rise building doesn’t have landmark designation, Golub said, and that helps. Landmark status means parts of the building deemed historic can’t be demolished or altered and developers must work around them.
There are also 12 floors of contiguous vacancy, meaning Golub & Co. and its team won’t have to pay existing tenants to move.
111 W. Monroe is slightly more complicated than a single-use conversion, said Jesper Dalskov, Stantec’s principal and residential market leader. Stantec is the architect for the project, which is being developed by Prime Group and Capri.
The $202.8 million project includes a 228-room hotel and apartments. It’s less straightforward than converting the office floors into apartments, Dalskov said, but not any more complicated than ground-up construction.
The biggest challenge is lining elements of the building vertically, including elevators, stairs and mechanical systems. Dalksov said his team ended up taking out several elevators that weren’t necessary and added stairs.
“They can present a challenge with laying out different floor plans for the different uses because if they’re located ideally for one use, they may not be the same for the other,” he said. “Our stairs and elevators were one of the major challenges to work into the plan on this one.”
Another hurdle is adding operable windows, which many older buildings don’t always have, Dalskov said. He estimated that each operable window can cost developers thousands. The 111 W. Monroe building has more than 600 windows.
Older buildings also often lack parking spaces, which means development teams have to seek relief from parking minimums and other zoning requirements.
Even deciding how much of these buildings to convert can pose a problem for architects and developers.
“The size of these buildings — some of them, not all of them — requires a complex either phased conversion, or you can’t do it or it’ll bring too many units,” said Alan Barker, principal at Lamar Johnson Collaborative.
Lamar Johnson is the architecture firm designing 208 S. La Salle, which spans half a city block. Barker said converting three of its 22 floors will yield almost 300 units.
Italy-based spirits company Campari Group submitted a proposal for converting eight floors of 79 W. Monroe into 117 residences with 41 affordable units, with a price tag of $64.2 million. The 1913 Bell Federal Savings & Loan building will have some architecture features like the Weather Bell sign restored and preserved.
Campari did not respond to requests for comment.
What office conversions create
Despite challenges, project partners on the La Salle Street conversions see an opportunity to create a revitalized district as other neighborhoods like Fulton Market and West Loop continue to snatch up new office tenants.
“I think the mayor’s office and the city is doing a great thing through [La Salle Street Reimagined],” Barker said. “They’re creating a district. This is not just one building that’s coming online and 300 units. Right now, it’s four. And hopefully, with the inertia that four buildings coming online will bring to the area, it’ll bring more investment because investment brings on more investment, and then this becomes a super vibrant area.”
Pemberton also said the addition of affordable units on La Salle will diversify the area. Nearby hospitality workers or first-time renters are just some of people who may now have a chance to live downtown.
“Having market-rate, affordable residences and hotel all together is going to instantly transform the area from a single usage as office into a sustainable mixed-use area,” he said. “It will attract people who want to live downtown.”
