Posted in SkyscraperCity Forums

February 1, 2005

If Rich Schaefer and his wife, Sheila, had any doubts about moving from their settled Lakeview neighborhood down to a massive planned development at the river and Lake Shore Drive, in the heart of downtown, the questions faded after the couple?s closing. The developer marked that event by throwing the new condo owners a catered eight-course dinner party with endless wine, a server, a violinist and other frills.

No, this is not a standard closing gift for Magellan Development Group, one of the partners behind the 28-acre Lakeshore East development, which sits west of Lake Shore Drive between Randolph and Wacker, on the site of a former golf course. But as the first closing in the first condo building at a development that eventually will include nearly 5,000 homes, the occasion demanded a celebration, according to Joel Carlins, of Magellan.

?We had a tribute, this being the first closing and a historic event, when you think about it,? Carlins says. ?When Lakeshore East is done, we?ll have 10,000 to 15,000 people living there.?

Carlins has plenty to celebrate. The 221-unit Lancaster, the new condo building where the Schaefers closed on their home in December, was about 95 percent sold at press time, and the Regatta, a newer condo tower underway at Lakeshore East, was 83 percent sold, according to Carlins.

The dinner that marked the start of residential growth at Lakeshore East ? billed as a ?village within the city,? with its own park, school, stores and roads ? marks a larger trend as well. Buyers of new homes, who have been flocking downtown for more than a decade, increasingly want to live not just downtown, but in the very heart of it.

Lakeshore East is not alone. Other new developments in the Loop and the area just east of it, a stretch between Roosevelt and the Chicago River that some are calling the ?New East Side,? include: Metropolitan Tower, the conversion of the Britannica Center office building, at 310 S. Michigan, into 245 luxury condominiums overlooking Grant Park; Metropolis, the 169-unit condo conversion of a 1913 Holabird & Roche office building at 8 W. Monroe; the Columbian, a 220-unit new-construction highrise underway at 1160 S. Michigan; Waterview Tower, a 236-unit luxury highrise planned for 111 W. Wacker, on the south bank of the Chicago River; and the Heritage at Millennium Park, a new 356-unit tower at 130 N. Garland Court, where Mayor Richard Daley has purchased a unit.

Sales at most of these new central developments have been swift. The Heritage at Millennium Park, one of the early entries in the current residential wave, had sold 80 percent of its units by mid-2003, two years before the first units would be complete. The Columbian, a newer project, started sales in July and drew more than 500 potential buyers to its grand opening weekend.

The Columbian, located just south of the Loop, has some of the most competitive preconstruction pricing in the area, ranging from the mid-$200s to $1.5 million. At LR Development?s 340 on the Park, one-bedrooms start in the $320s, two-bedrooms are priced from the $510s, and penthouses start around $3.3 million. People have been willing to pay a premium to live in the heart of downtown, and evidence suggests they?re choosing the area at the expense of other neighborhoods.

The Loop-New East Side had a market share of 23 percent during the second quarter of 2004 and of 18 percent during the third quarter, according to housing analyst Appraisal Research Counselors. By comparison River North, which has been a hotbed of residential development in recent years, had 18 percent of the pie during the second quarter and 13 percent during the third.

Areas north of the Chicago River, such as River North, the Gold Coast, Streeterville and River East, have long been booming residential locations, with new condominiums, retail and services drawing a steady stream of homeowners and renters. And south of Roosevelt, the giant Central Station community and various in-fill projects have been adding new townhouses and condos for years.

The blocks in between Roosevelt and the River, however, used to be the purlieu of offices and institutions. Streets here empty out after 6 p.m., which is also when many of the shops and restaurants serving Loop workers close.

So why is residential development moving into the dead center of downtown?

To some extent, it?s a natural progression. New-home construction has boomed all around the Loop, and downtown condominium prices have skyrocketed. Converting aging Loop office buildings that are growing obsolete as commercial space into residential use can make a highly profitable exit for owners. And on the scarce land available for development downtown, homes are safer than offices in the current market, with premium condominiums in the best locations selling for more than $500 per square foot.

For buyers, locations between Roosevelt and the Chicago River enjoy some of the best lake, park and skyline views in the city, and unless you work at home, the commute times to Loop offices are hard to beat. The city?s best cultural institutions ? the Art Institute, Symphony Center, the museum campus, the Harold Washington Library and the theater district ? sit within walking distance.

Another factor has been surprisingly strong in spurring residential growth in the area. Millennium Park, the brightest (and perhaps priciest) gem in Mayor Richard Daley?s civic crown, is not just an added perk for buyers or a benefit that could tip the scales, all things being equal. For a number of people interviewed for this story, Millennium Park has become a major or even deciding factor in where they buy.

?To me, Randolph is where everything is moving to,? says Tom Panoplos, who was one of the first buyers to reserve a unit at 340 on the Park, a condo tower at 340 E. Randolph by LR Development that will be a part of Lakeshore East. Panoplos, a 35-year-old investment manager for Mesirow Financial, currently lives at the Pearson, a new LR building in Streeterville, a mile north of the 340 on the Park site.

He has barely had time to hang photos in his current condo, so why buy another place so soon? The answer has everything to do with location in general and Millennium Park in particular.

?Right now, I have a lake view, and I?m on Lake Shore Park, and even with that small park, you appreciate what it means to have open space and light in front of you,? Panoplos says. ?I have friends who live along Randolph, and the view is unparalleled. The big draw is clearly the park.?

Panoplos, who is single, bought a three-bedroom condo with a southwest view overlooking the lake, the stunning new Jay Pritzker Pavilion by Frank Gehry, the green of Millennium Park and in the distance, Buckingham Fountain.

Not only are the views breathtaking, they?re forever in many of these buildings. No one is going to construct a new highrise in Millennium or Grant parks, blocking views from Metropolitan Tower or 340 on the Park. Riverfront projects like Waterview Tower, also have built-in view protection.

But views aside, Panoplos is leaving a downtown neighborhood with an established residential base to move to a spot known more for offices than for homes. The land beneath Lakeshore East is part of the sprawling Illinois Center office complex, and the blocks to the west are dominated by offices and institutions.

Panoplos acknowledges that the Loop and the New East Side don?t feel especially residential. Convenient shops, services and amenities ? other than the grand, obvious ones like Millennium Park, the Chicago Cultural Center and the Art Institute ? are rare, but, he points out, no rarer than in Streeterville.

?I?m three blocks east of Michigan Avenue, but it?s still four blocks for me to get to a Starbucks ? there?s not a whole lot of commercial east of the Water Tower,? Panoplos says. ?But you see that Millennium Park infrastructure as well as the development that I?m in, and it?s a safe assumption that there will be more retail there to support it.?

And Michigan Avenue will be just far enough for Panoplos once he moves into his new home. ?I think I will have more convenience,? Panoplos says. ?I work in the Loop, so it will be an easier walk there and to the museums and theaters and parks and things. When I do go to Michigan Avenue now, it?s almost an inconvenience. There are so many shoppers, it?s hard to get over to Pearson. I?m looking forward to selectively coming up to North Michigan Avenue.?

Cathy Bremer, who bought a two-bedroom two-bath condo at Metropolitan Tower, at 310 S. Michigan, agrees that the Loop needs more restaurants, shops and services.

?I would say that the restaurant scene hasn?t quite arrived,? Bremer says. ?The West Loop, on Randolph, has some great restaurants, and River North does. There are some around here, but there?s not as much variety as you would like.?

But Bremer, an attorney whose office is in the West Loop, will have a five-minute drive or a 30-minute walk to get to work, and she?ll have immediate access to the lakefront, which is key for her and her husband, whose hobbies include running and biking along the lake and attending outdoor festivals in Grant and Millennium parks. Her husband?s commute will be farther ? he?s a physician with offices in the southwest suburbs ? but he doesn?t mind trading that drive for the excitement of living downtown.

The Bremers are ?empty nesters? who raised their children in suburban Oak Park and decided after the kids had flown the coop, to test out city living. They bought an ?in-town? unit at 330 S. Michigan for weekends and liked the lifestyle so much they sold their large single-family home in Oak Park. Developers say that people like the Bremers, downscaling from large suburban homes to condos in the city, where they can take advantage of cultural and social events, have been driving much of the downtown market.

In the Loop-New East Side area some buildings report that empty nesters account for more than 50 percent of sales.

At the other end of the spectrum, college students have been another important component in achieving the Daley administration?s stated goal of a ?24-hour downtown.? New downtown dorms and facilities for schools including Columbia, DePaul, Roosevelt and the Art Institute have boosted population and added street life.

?The streets do empty out somewhat after 6, but with the new dorm on Congress and all those students living here?there are always a lot of students around,? Bremer says. ?And there are always people on Michigan Avenue too. Wabash and streets to the west do empty out.?

Rich Schaefer and his wife, Sheila, who were the first buyers to close at the Lancaster, in Lakeshore East, are happy with their one-bedroom condo. It has a great view, Schaefer says, even though it?s only on the fourth floor, because it overlooks the central park in Lakeshore East. They miss some of the street life and neighborhood amenities they had when they lived in Lakeview, but they?re also discovering that there?s more to downtown than meets the eye.

?We lived near Southport, and there were a lot of things going on there; there?s nothing wrong with that neighborhood,? Rich Schaefer says. ?But we?re still discovering things around the new place. We just found out there?s a restaurant in the highrise next to us on the 7th floor. We have discovered the under-Wacker network, which is a whole other world, and the pedways. On a day like today when it?s 10 degrees, and no one?s out, that?s when you start to learn all those lower Randolph shortcuts into buildings.?

Schaefer is a self-employed computer consultant whose office is at home and whose clients are downtown, so those shortcuts and quick commute times have made his life much easier. Rather than traveling all the way back to Lakeview after a morning appointment downtown, only to learn later that he must return to the Loop, he?s usually home in 10 minutes these days.

A smoother schedule gives him more time to walk B.J., the family dog, and to explore the hidden gems of downtown Chicago. There is a shortage of restaurants in the Loop, but some of the best are simply invisible to those who aren?t in the know. Everest, located on the 40th floor of the Board of Trade building, is widely considered one of the finest restaurants in the city, but you?d never stumble upon its four-star Alsatian cuisine walking down LaSalle the way you might in a traditional neighborhood. The original Heaven on Seven, which has maybe the best Cajun fare in Chicago, is likewise tucked away on the 7th floor of an office building at 111 N. Wabash. The Alumni Club, at 150 N. Michigan is accessed by taking an escalator to a lower level in the Smurfit-Stone Building or through the pedway network that connects downtown buildings under street level.

Other Loop restaurants and bars are located in hotels ranging from the Palmer House to the Chicago Hilton and Towers, and they?re not always noticeable from street level. One advantage to hotel bars and restaurants is that they keep late hours. Some of the Loop treasures hidden in office buildings, including Heaven on Seven, still close when workers leave for the day, though the city is encouraging downtown businesses to keep later hours.

The lack of grocery stores used to be a major complaint for downtown residents, especially in the Loop, but a number of new supermarkets, including Jewel Food Stores at 1224 S. Wabash and at 550 N. State, have alleviated that problem.

No doubt, as the downtown population continues to grow, so will the amenities. At press time, Joel Carlins, of Magellan, said he was working on final plans for the retail component at Lakeshore East. A 90,000-square-foot retail center at the community will have 400 deeded parking spots and if all goes according to plan, a full-service grocery. Retail or restaurant uses are planned for the bases of several Lakeshore East highrises and the developer is discussing another retail center that would be located near Columbus with a large anchor store occupying a two-story space of 240,000 square feet.

Other new highrises are adding restaurants or shops at ground level, and Riverside Park, a 62-acre development at Roosevelt and Clark, just southwest of the Loop, will include 670,000 square feet of retail space, according to Rezmar Development Group, the developer. That mixed-use project, which also includes plans for more than 4,000 residential units, is slated to begin in 2005.

Schaefer, who still hasn?t completely finished moving into his new condo, says he already likes living in the Loop, though there is a bit of a learning curve.

?We were the first ones in,? Schaefer says, ?so we?re asking all the questions, where?s this and how?s that work. Right now we get most of our information from the doormen.?