COVID-19 has devastated Chicago real estate, but it’s amplified calls for equity. Will 2021 be a year of progress on the South and West sides?
Next year is setting up as quite the balancing act for commercial real estate and development in Chicago.
The coronavirus pandemic has challenged the prosperity of Chicago’s downtown. The unprecedented times also have hit neighborhoods hard and brought a rare opportunity to reverse the decades-old trend of disinvestment on the city’s South and West sides.
Led by Chicago Mayor Lori Lightfoot’s Invest South/West initiative and also including contributions from the private sector, efforts to improve the geographic distribution of development dollars showed early signs of progress in 2020.
Lightfoot, who took office in May 2019, already had emphasized the need to revive those neighborhoods before the public health crisis crippled the economy. COVID-19 1/4 u2032s disproportionate impact on lower-income residents amplified the public dialogue.
Property damage and thefts following the May death of George Floyd at the hands of Minneapolis police further devastated many Chicago businesses, and large protests drew new attention to issues of race and economic opportunity.
“Something that seemed like the right thing to do now appears to be an imperative,” said the city’s planning director, Maurice Cox. “It has created a sense of urgency.”
Cox oversaw a process to formally invite development proposals for sites in Austin, Auburn Gresham and Englewood in August, as part of Lightfoot’s Invest South/West plan to distribute $750 million in grants to spark private investments on the South and West sides. Cox’s planning department in November released a second batch of requests for proposals for sites in Bronzeville, South Chicago, New City and North Lawndale.
Yet there are big hurdles.
Through the first 10 months of this year, Chicago-area commercial property sales volume by dollars was down almost 37% from the same period a year ago, according to New York-based real estate research firm Real Capital Analytics. Nationally, volume was down almost 40%.
Downtown offices have all but shut down since March, and real estate experts are bracing for an expected wave of subleases hitting the market as many companies lay off workers or expand work-from-home options for the long term. The downtown sublease market has grown by more than 2 million square feet since the onset of the pandemic, increasing the total inventory to an all-time high of almost 5.3 million square feet, according to MB Real Estate.
Waves of bars, restaurants, shops and other small businesses have closed for the winter, or in many cases forever.
Leon Walker, a South Side developer, is among those who argues in favor of building up racially diverse neighborhoods because of the economic crisis, rather than in spite of it.
“It’s not a charity case. This is a business case,” said Walker, the second-generation owner of DL3 Realty. “The business case is, for Chicago to thrive now and into the future, you have to make these kinds of critical investments to our neighborhoods and be inclusive for working people throughout the city to participate in the city’s growth.
“We’ve got a fiscal problem in Chicago because you’ve got to balance this budget on a smaller tax base. The key to solving that problem is expanding the tax base. The key to that happening is making our neighborhoods much more livable and more attractive to working families.”
DL3 has been involved in several successes on the South Side, including bringing a Whole Foods grocery store to an Englewood retail center in 2016.
Walker’s firm also has redeveloped a former Target store in Morgan Park into a Blue Cross and Blue Shield of Illinois facility with offices and a community center that ultimately is expected to have as many as 550 employees.
In Woodlawn, DL3 is in the midst of several developments designed to capitalize on the planned Obama Presidential Center nearby. The firm has completed a Jewel-Osco grocery store at 61st Street and Cottage Grove Avenue, and is set to start building a $38 million Friend Health medical campus on the former Cosmo Beauty store site at 63rd and Cottage Grove.
DL3 eventually could redevelop a retail strip center it owns at 1500 E. 63rd St. near Jackson Park Golf Course and the Museum of Science and Industry, and the firm is interested in a city-owned lot across the street, Walker said.
“As developers, we can do our part,” Walker said. “In order to be successful, we need a whole slew of others.”
Invest South/West
Under Cox, who was hired away from Detroit by Lightfoot, the city’s planning department has taken an active role in trying to couple city dollars with well-conceived development plans that can bring apartments, restaurants, shops and other needed resources to strategic locations.
The process includes conceptual renderings from many of the city’s top architecture firms to help guide developers’ visions for the sites.
Early visions for those sites include a second phase of the Whole Foods-anchored Englewood Square, which would add residential and retail buildings and renovate a historic firehouse. On the West Side, they include rehabilitating and expanding the long-vacant Laramie State Bank of Chicago building as part of a mixed-use development in Austin.
The initial batch of three sites generated 12 proposals, which the city continues to evaluate before choosing development teams. Encouraged by the quality of the responses, Cox in November announced a second round of four sites — rather than the initially planned three.
Cox’s hope is that as proposals turn into reality, privately funded developments will cluster around them, in turn reversing population loss and adding much-needed jobs and resources.
“I think the response that we received is an indication of the level of enthusiasm that the private sector has for reinvesting in traditional neighborhoods on the South and West sides,” Cox said. “It’s a new way of shining a light on these amazing neighborhoods, and it seems to be getting the desired response.”
Other efforts
Developers also are responding to increased calls for diversity in their own ranks.
In late 2019, labor unions and some of the best-known names in Chicago development joined forces with United Way of Chicago to create a nonprofit called Hire360, which is focused on increasing diversity within construction crews.
Some developers involved in that program are creating their own diversity initiatives.
One of them is Sterling Bay, which has launched Prysm Institute, an incubator and accelerator for startups in life sciences, heath care and technology. One focus of the Lincoln Park facility is to increase investments in firms owned by women and people of color.
Life sciences labs and offices are expected to become a key component of Sterling Bay’s nearby $6 billion Lincoln Yards mixed-use development, which is expected to break ground in early 2021.
Meanwhile, the goal of a Chicago Community Trust-backed initiative, the Chicago Emerging Minority Developer Initiative, is to identify causes of inequity in the development industry, and to foster developers of color.
“The key is attracting and encouraging additional entrepreneurs to come to these communities,” said DL3 1/4 u2032s Walker, who is involved in the initiative. “I’m particularly passionate about making sure that we attract Black and brown entrepreneurs to come back home.”
Also involved in the effort are Gwendolyn Hatten Butler, president of investment and real estate development firm Capri Investment Group and longtime real estate lawyer Graham Grady, a partner in the law firm of Taft Stettinius & Hollister LLP.
In an emailed statement to the Tribune, Grady said during his stint on the Chicago Plan Commission from 1989 to 1995, “never once did I see a Black developer” come before it with a proposal.
Sometime next year, the initiative hopes to identify aspiring developers who need to be paired up with investors, lenders, industry expertise and other resources.
The initiative “is about finding those entrepreneurs who exist already, and they’re working in home flipping or construction or as brokers, and now they want to invest in their own community,” Walker said. “What’s behind the challenges of a built environment is a psychological, spiritual war. When you create a new development in an area, you bring light and a different energy. That energy attracts more energy.”
Twitter @Ryan_Ori
