While one developer is pushing ahead with plans to build 2,650 apartments on Goose Island, another is pulling the plug on a big office and residential development just across the Chicago River.
A joint venture of broadcast company Nexstar Media Group and Riverside Investment & Development has dropped plans to build 1.2 million square feet of offices and a 310-unit apartment tower at 700 W. Chicago Ave., Riverside CEO John O’Donnell said.
Instead, brokers from Cushman & Wakefield have in recent weeks been seeking tenants to lease the 120,000-square-foot former Chicago Tribune distribution building on the 7-acre site, mostly likely as a last-mile distribution center, O’Donnell said.
The retreat by the Dallas-based broadcasting company and the Chicago developer of trophy office towers stands in contrast to Vancouver-based Onni Group’s plan to build a five-tower development with buildings as tall as 55 and 56 stories at 901 and 904 N. Halsted St. That project, if approved by the city, could include up to 2,650 apartments, a 247-room hotel, office and retail space.
Onni Group last week held its first public meeting on the project immediately north of the Nexstar property, saying it wants to begin demolishing a Greyhound bus maintenance facility on the 8-acre site in early 2022.
Differing fates of the two projects demonstrate the challenges involved in remaking a 760-acre stretch of industrial land along the river north of the Loop, where the city changed land use policies to allow nonindustrial towers in 2017. The policy changes freed up prime riverfront real estate to be redeveloped, which also could generate zoning-change fees and property taxes for the city.
But those fees and the sites’ location within a pilot area where there are higher affordable-housing requirements — 20%, all on-site — have made some projects difficult to finance. The 700 W. Chicago project also has been made more difficult by the COVID-19 pandemic, which leaves a record level of vacant office space in downtown Chicago.
“We thought looking for office tenants right now was a waste of time,” O’Donnell said. “Nobody knows what kind of space they need. Everyone’s evaluating. There’s so much vacancy downtown, it doesn’t make sense to start a new building like that.”
Downtown Chicago ended 2020 with a record 15.5% vacancy, or 21.4 million square feet of offices that aren’t leased, according to CBRE. The commercial real estate brokerage estimates that vacancy rate could climb as high as 20% or more by the end of 2022, in the wake of the effects of COVID-19.
O’Donnell said he expects the warehouse space to be leased, likely to a company seeking last-mile distribution space near a large number of households just north of downtown.
Any long-term deal would formally end the vision for high-rises on the site, where Riverside and the then-named Tribune Media first unveiled plans in 2017.
The development partners believed they were close to a deal to land the headquarters of United Airlines before the airline instead signed a long-term extension for its Willis Tower space in 2019.
All that appears left from the 700 W. Chicago plan are renderings of high-rises, O’Donnell said.
“I absolutely love the aesthetic of the site and the area,” O’Donnell said. “We came very close to some tenants and spent a lot of money trying to get it leased. But all we have is a pretty picture right now.”
The site at Halsted Street and Chicago Avenue also was part of a 37-acre proposal by Tribune Media to land Amazon’s second headquarters, or HQ2, which eventually would up in the suburbs of Washington, D.C.
Tribune Media put all 37 acres up for sale in early 2019, and later that year the broadcast company was acquired by Nexstar in a $4.1 billion deal that included Tribune Media’s real estate holdings in Chicago and other cities.
It’s unclear whether Nexstar still wants to sell all of the land, or if it could try to redevelop all or parts of it. Nexstar spokesman Gary Weitman declined to comment.
Onni Group appears to have been able to overcome financing challenges in part because it negotiated a lower purchase price for the site — $38 million, down from an initial $50 million deal with Greyhound — in response to the affordable-unit requirements.
The firm also is known for keeping apartment buildings it develops, rather than selling them after they’re built and filled with renters. The decades-long investment strategy may help offset the 500-plus affordable units, which typically lose money for developers because of high construction costs.
One of the neighborhood groups that hosted last week’s community meeting noted that Halsted Point, as Onni’s development is called, includes tentative plans for a pedestrian bridge across the river to the 600 West Chicago office building. That seems to be a sign that other residential plans in the area could take a long time to kick off, said John Bosca, president emeritus of the Neighbors of River West.
“Onni is the lone wolf right now,” Bosca said. “They can afford to be and they’re good at what they do. But even they seem to realize their best chance is to connect over to 600 West Chicago. They’re not trying to connect south. They’re going east, where the people already are.”