Group Fox and Sonder want to convert five vacant office floors in the Axis Apartments & Lofts tower into short-term rental units. The owner of the tower is betting that the battered hotel market has a bright future near the lakefront neighborhood's medical campus.
Crain's Chicago Business states that apartment owner Group Fox and short-term rental operator Sonder unveiled their plans to convert five vacant floors at 446 E. Ontario Street into a 101-room hotel according to a letter from the Streeterville Organization of Active Residents (SOAR).
The project would require the City Council to sign off on the new use for the building. Floors 6 to 10 in the 60 story Axis Apartments & Lofts tower would be redeveloped as rental units available for a minimum of two-night stays.
Hotels have not fared well due to the Covid-19 pandemic and some have been sold at severe discounts over the past two years. But demand for short-term rentals could be resilient from people that are visiting the medical campus. In recent years, such offerings have become popular among apartment landlords as a way to lock in revenue by renting them out to operators like Sonder.
This could be attractive to residents in the building who want visiting friends and family to stay close by. This would be Sonder's first location in Streeterville.
The rental units would include the following:
- Range from one to three bedrooms
- Include an open terrace with landscaping on the sixth floor
- More similar to an Airbnb or Vrbo than a typical hotel room
- Offer a minimum of two-night stays
According to The Real Deal, some residents and aldermen have expressed concerns about the security risks of transient guests disturbing people who live in the same building. Having a minimum of two night stays should alleviate this concern.
A venture of Group Fox bought the 60-story tower in 2016 for more than $225 million according to Cook County property records. The tower was built in 1986 and includes 615 residential apartments above the bottom-floor commercial space.
WTTW News reports that there has been so much instability over the past couple of years in the hotel industry. According to Michael Jacobson, president and CEO of the Illinois Hotel & Lodging Association, hotels have lost over $5.5 billion in room revenue throughout the last two years of the pandemic. During the last two months, Chicago has been dead last in terms of hotel occupancy.
CBS News Chicago states that downtown hotels in Chicago are starting to rebound and are seeing a lot more business travelers looking to come back. Some are predicting that hotel room revenue will be nearly back to normal by next year.
Group Fox was founded in 1978 and owns and operates more than 4,000 apartments in 15 Chicago neighborhoods. One of their properties, the Lofts at River East along the Ogden Slip in Streeterville, was a former warehouse that Group Fox converted into apartments in 2015. The building also includes a Target store and a bowling alley.
Sonder Holdings Inc. manages short term rentals, such as apartment hotels, in North America, Europe and Dubai. Their website states that it was founded in Montreal, Canada in 2014 and since 2016 has been based in San Francisco, California. Sonder manages over 6,300 units in over 35 cities in 10 countries and has served over 1 million guests.
