After the pandemic, many office buildings in Chicago and all across the country remained empty as workers continued to work from home. Chicago's Lasalle business corridor is lined with aging office high-rises plagued by high vacancy rates. The city is launching a new program to spend tax-increment-financing money to convert those offices to condos and apartments.
The city plans to begin offering developers TIF dollars and other incentives to repurpose the historic buildings along the street. The goal of this plan is to create more than 1,000 new residential units, with 300 designated as affordable.
The properties that are in the TIF district that qualify for help to cover conversion costs are located on or next to LaSalle Street from Wacker Drive south to Jackson Boulevard.
ENR Midwest states that Chicago mayors going back to Richard M. Daley have used TIF districts to spur development in neighborhoods like these.
The LaSalle/Central TIF District contained about $197 million at the end of 2021. It was formed in 2006 and will expire in 2030. In a TIF, the assessed value of property is frozen and as the property value increases, the city uses the funds for improvements in the area. Increased revenue from sales taxes also goes into the TIF fund.
LaSalle Street is full of buildings with Classical and Art Deco architecture, many of which are listed on the National Register of Historic Places. This designation makes them more challenging to update into modern workplaces. The city reports that 59% of the LaSalle Street buildings pre-date 1940, 85% of the real estate is for office use, and there is currently no affordable housing on the street.
In addition to TIF funds, other public resources identified as helpful to fulfill the plan include:
- Federal tax credits
- Cook County property tax incentives
- Low Income Housing Tax Credits
Contributing factors to one of the highest commercial and retail vacancy rates in the downtown area are:
- Aging commercial buildings
- Shifting market demands
- Work-from-home trends
The vacancy rates are estimated at 26% for office and 35% for retail.
"As one of Chicago's most architecturally compelling and transit-served corridors, there should be more mixed-uses and far more economic activity both inside and outside of corridor properties."
Planning & Development Dept. Commissioner | Maurice Cox
The plan would include reactivation of building lobbies and other spaces for cultural or entertainment purposes and storefront improvements such as grocery stores and restaurants.
The deputy commission for the Chicago Department of planning and development, Peter Strazzabosco stated that Google's recent $105 million purchase of the James R. Thompson Center for its headquarters may also contribute to revitalizing nearby LaSalle Street.
As part of the sale, the state of Illinois, which owned the Thompson Center, will receive $30 million and another property at 115 S. LaSalle Street, which is the former headquarters for BMO Harris Bank, and will house 1,800 state employees who now work at the Thompson Center and at other leased offices.
Currently, one of the owners of 115 S. LaSalle is the Building Owners and Managers Association of Chicago. The executive director of BOMA, Farzin Parang, agreed that downtown office buildings are being hampered by a slow return to the office, record-high tenant vacancy due to the COVID pandemic and rising property taxes. BOMA is a trade association that represents the office building industry.
Parang also said that other strategies should be considered, such as:
- Property tax reform to reduce the tax burden on commercial property and businesses
- Finding innovative ways to entice retailers to lease space
- Incorporating art exhibits and cultural events to increase pedestrian activity
Bonnie McDonald, president and CEO of Landmarks Illinois, a non-profit that supports historic preservation, stated that the plan has the potential to revitalize a commercial street that is a jewel of the city facing hard times. She also stated that adaptive reuse of places is a positive and will make the street more bustling instead of shutting down at 5 p.m. when offices closed.
Proposals are due by December 23rd and will be evaluated by the city based on economic viability, development team diversity and experience, design, public benefits and other factors.