Chicago will lead office-to-apartment flips, report says
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Chicago will be at the forefront of turning office buildings into apartments in the coming years, a new report shows.
Why it matters: Cities across the nation with fewer commuters and shuttered businesses are scrambling to revitalize downtowns in a post-pandemic world.
Driving the news: Roughly 70% of the units in Chicago's pipeline for conversions will be repurposed office spaces, exceeding the share in Los Angeles or New York City.
- That's according to the report by RentCafe, which analyzed data from commercial real estate intelligence service Yardi Matrix.
Zoom in: The push comes as downtown Chicago foot traffic is at 52% of pre-pandemic 2019 levels, Axios' Alex Fitzpatrick and Kavya Beheraj report.
What's happening: Chicago has announced an initiative to revive the financial district along LaSalle Street, which last year logged the highest post-pandemic vacancy rates in the Loop.
- The effort includes offering city financial assistance for proposals that will develop more than 1,600 mixed-income housing units.
The big picture: The national pipeline for office conversions is hot, even as those flips slowed from their record high in 2020. In Chicago, 2,454 apartments are expected to be created from office space in future years, according to the RentCafe report.
- In 2022, Chicago transformed only 68 units. Midwest cities including St. Louis, Cleveland and Kansas City were among those with the most apartments converted from other building types.
Be smart: There's still demand for high-quality offices, says Ralph Zucker, CEO of the development firm that's transforming AT&T's former campus in suburban Hoffman Estates into a sprawling hub of work, residential and entertainment space.
What they're saying: Bell Works Chicagoland has proved particularly appealing to commuters (who want to work closer to home), suburban workers (who are reluctant to return to outdated offices) and those who want perks like a bar, cafe and pickleball courts close at hand, Zucker tells Axios.
- The revamp has attracted more than 250,000 square feet of commercial leases since its inception in 2018, according to Inspired by Somerset Development, which plans to start building 164 high-end townhouses and about 300 apartments in spring 2024.
Of note: Conversions require time, money and effort. Not all projects will be completed, and some could take multiple years.
What we're watching: The conversion trend is poised to grow as more cities roll out incentive programs, according to Steven Paynter at Gensler, a global design and architecture firm.