Lots of valid points here, I'll just comment on a couple: My wife and I relocated our family from Chicago to Dallas in 2019. I was a lifelong Chicagoan, Gage Park, Edison Park, Gordon Tech, UIC, CBOT, dad worked for the water dept. I still have businesses in Chicago so I go back and forth. The difference between Chicago and Dallas, Illinois and Texas is a gulf, the gulf of common sense and attitude. I always would boast about being from Chicago, the friendliest big city in the country. No more, Chicago has gotten mean and pissed off. Texas is just way more civil, it actually takes some getting used to when strangers are so polite again.
Second comment, there was a retired Army dentist leasing a space next to my West side Chicago location, he was vying for one of the dispensary licenses. He has the professional resume, and he's black. This is, in theory, the model candidate for one of these licenses. But he's not juiced in.....so he got bumpkus. "We don't want nobody that nobody sent", and he didn't know the right people. Great job Chicago.
An acquaintance of mine loves the business climate in Dallas. Says it is similar to NYC. Lots of action and lots of city civic pride. Had a couple of people I know move there. Of course, all the trendy people move to Austin. I love Austin too but it's a government town.
Great point about the Pilgrim’s risk taking. I believe it’s a similar spirit in moving from a high to low tax state. I noticed among my fellow northern transplants in North Carolina that we share a certain sense of adventure no matter our age or backgrounds.
“They knew the old place had no hope or opportunity”, so instead of just dreaming about moving some day, my neighbors and I uprooted our lives and made the effort to move a long distance. In my case I didn’t know a single person in North Carolina, but my first goal was not to move to NC, it was to leave Illinois. Big difference. I got lucky in that I unknowingly picked a great spot and don’t have to move again, which I was prepared to do.
There was no place quite like Chicago when it was at its peak, but those days are gone and never coming back. I think it’s now in permanent decline. If the downtown doesn’t recover, all of the large buildings losing tenants will slowly become financially unviable because their taxes and expenses are not going down. There’s already been a few buildings where the owners just gave them back to the lenders, and I expect more of that as office leases are either cancelled or downsized. Currently 25% of Loop storefronts are vacant. Before crime increased, there was the possibility that old buildings could be repurposed as apartments or condos, but that ship has sailed. LaSalle Street and its beautiful old buildings will be hard hit as those buildings need too much investment to turn them into modern office space. My former building at 135 S. LaSalle is rumored to be the next to be given back to its lender.
Your latter point is an excellent one and part of a bigger challenge to the downward spiral. The 135 building was going to have very big problems once BofA moved out. Same with the old Harris Bank/BMO building. The LaSalle corridor is my favorite spot in the Loop with the CBOT framed by the old traditional buildings to the north (I even have a pencil sketch of this view hanging in my home office). The bulk of them are way out of code as well as being outdated technologically. In a vibrant business environment an investor might find value in going to the considerable expense of gutting those buildings. But who in their right mind would do that now?
The vacancy rate in the city office market is somewhere around 20% but that's not the entire story. The new buildings along canal and Wacker are almost fully leased up. But even that space is only sporadically used. On any given day there's probably only 40% of the active work force in my office. The knock on impact to other local businesses such as restaurants and retailers has been devastating. They'll get through the summer just because of the increase in tourist traffic. But the fall and winter are going to hurt. While there are things that could be done to save the heart of the Loop, the Combine does not have the imagination, guts or fortitude to do what needs to be done and I suspect the Loop will once again resemble what it was back in the 70s in the not too distant future.
The LaSalle corridor is my favorite too. I spent my whole career within 1 block of the CBOT except for my time at the very end when they moved my office by the Ogilvie center. I hated working away from LaSalle Street.
I used to work on a remodeled floor in the 135 building, but it still had the original black and white checkerboard tiled bathrooms from 1930 like the CBOT building had. Not good. The footprint of that building made for small offices, which is not appealing to new tenants. What does the lender do with a non-viable building like that? Who do they give it back to? I guess it just gets abandoned eventually for nonpayment of taxes. That building has a huge property tax bill, too.
The Harris/BMO building is going to be leased by the State of Illinois for workers from the Thompson center, so that building will soon look like a public housing project inside.
Another building I worked in, the old Insurance Exchange at 175 W. Jackson, was also given back to its lender by Brookfield Properties. They bought it for $305 million in 2018 even though it was only 67% leased. When I worked there that building was a dump, but after it’s expensive renovation it was beautiful. It’s interesting that they couldn’t lease it out because it has large floors, but with the demise of the trading floors and being on the edge of the Loop, I guess it was harder to do. Amazing that a major property owner like Brookfield gave up and ran away in only 4 years, but it’s indicative of where the downtown is headed.
Here is the weekly office occupancy rates from Kastle Systems, which maintains building security entry systems nationwide. Chicago is only at a 42% occupancy rate. The downtown will not recover if office workers never come back to something close to full occupancy. https://www.kastle.com/safety-wellness/getting-america-back-to-work/
The Kastle swipe data my be more indicative of my point on how many people are coming into the office on any given day. My 20% number came from a recent press release. I think it might have been JLL data. The bathrooms at 135 were something that had been mentioned to me a couple months ago. Apparently, the issue was that building codes require that if you upgraded a single bathroom they had to be upgraded throughout the building. I can't imagine it is anything other than a favor to the plumbers union. Now it is a blockage to anything being done. I've heard that an investor was considering buying the property to turn it into student housing.
The renovation costs have got to be crazy on those old buildings. The lobby is beautiful at the 135 buildings, but the rest of the building is not. Even the HVAC was inconsistent in our “remodeled” office.
The developer who bought the Harris 115 LaSalle building bought it at a 33% discount to its asking price from the lender. He is putting in 12 floors of offices for state workers and 500 apartments above that.
That area can be pretty empty and forbidding at night, especially with the increased downtown crime. I can’t imagine wanting to live there.
One last post-script: I got my hair cut yesterday. Been going to the same place for 25 years. Before my appointment my stylist (I use that terms only out of respect, theres not a lot of style to my short cropped hair) went to the back and I heard a celebratory yell come from the back room. A little later, while getting my hair cut, one of the others walked in with a bottle of wine.
Curious, I asked Barb ('ll call my stylist Barb to keep it simple), what was up. She confided in me that they had been in longtime negotiations over their rent. The retail spaces on either side of them are vacant. I imagine much of the office space in the extremely old building is as well. After doing more digging I learned that, in fact, they were actually negotiating with the bank. The landlord had turned they keys over long ago. Despite surviving the pandemic, this business, which had been there for 25 years, was looking at being kicked out of their space. Due to the factors we discussed above, they have still not come close to recovering the customer volume they had pre-pandemic. They are struggling. And the bank was actually going to let them leave, losing a reliable stream of cash flow rather than negotiate a reduced rent rate.
And I just happened to be there when they got the news that the bank agreed to negotiate the rate. And ALL of the employees were in a celebratory mood. I've known the current owner and Barb since they started working there. I knew the original owner since before she opened this place. You could see the relief on all their faces. All this time I suspected, but just did not realize how close they were to being booted.
The bank is clearly in trouble with this asset. As are many of the retail businesses that are still operating in the Loop. There are a whole lot of shoes yet to drop. I think we are only in the 2nd or 3rd inning of this very long game.
Lots of valid points here, I'll just comment on a couple: My wife and I relocated our family from Chicago to Dallas in 2019. I was a lifelong Chicagoan, Gage Park, Edison Park, Gordon Tech, UIC, CBOT, dad worked for the water dept. I still have businesses in Chicago so I go back and forth. The difference between Chicago and Dallas, Illinois and Texas is a gulf, the gulf of common sense and attitude. I always would boast about being from Chicago, the friendliest big city in the country. No more, Chicago has gotten mean and pissed off. Texas is just way more civil, it actually takes some getting used to when strangers are so polite again.
Second comment, there was a retired Army dentist leasing a space next to my West side Chicago location, he was vying for one of the dispensary licenses. He has the professional resume, and he's black. This is, in theory, the model candidate for one of these licenses. But he's not juiced in.....so he got bumpkus. "We don't want nobody that nobody sent", and he didn't know the right people. Great job Chicago.
An acquaintance of mine loves the business climate in Dallas. Says it is similar to NYC. Lots of action and lots of city civic pride. Had a couple of people I know move there. Of course, all the trendy people move to Austin. I love Austin too but it's a government town.
Great point about the Pilgrim’s risk taking. I believe it’s a similar spirit in moving from a high to low tax state. I noticed among my fellow northern transplants in North Carolina that we share a certain sense of adventure no matter our age or backgrounds.
“They knew the old place had no hope or opportunity”, so instead of just dreaming about moving some day, my neighbors and I uprooted our lives and made the effort to move a long distance. In my case I didn’t know a single person in North Carolina, but my first goal was not to move to NC, it was to leave Illinois. Big difference. I got lucky in that I unknowingly picked a great spot and don’t have to move again, which I was prepared to do.
There was no place quite like Chicago when it was at its peak, but those days are gone and never coming back. I think it’s now in permanent decline. If the downtown doesn’t recover, all of the large buildings losing tenants will slowly become financially unviable because their taxes and expenses are not going down. There’s already been a few buildings where the owners just gave them back to the lenders, and I expect more of that as office leases are either cancelled or downsized. Currently 25% of Loop storefronts are vacant. Before crime increased, there was the possibility that old buildings could be repurposed as apartments or condos, but that ship has sailed. LaSalle Street and its beautiful old buildings will be hard hit as those buildings need too much investment to turn them into modern office space. My former building at 135 S. LaSalle is rumored to be the next to be given back to its lender.
Your latter point is an excellent one and part of a bigger challenge to the downward spiral. The 135 building was going to have very big problems once BofA moved out. Same with the old Harris Bank/BMO building. The LaSalle corridor is my favorite spot in the Loop with the CBOT framed by the old traditional buildings to the north (I even have a pencil sketch of this view hanging in my home office). The bulk of them are way out of code as well as being outdated technologically. In a vibrant business environment an investor might find value in going to the considerable expense of gutting those buildings. But who in their right mind would do that now?
The vacancy rate in the city office market is somewhere around 20% but that's not the entire story. The new buildings along canal and Wacker are almost fully leased up. But even that space is only sporadically used. On any given day there's probably only 40% of the active work force in my office. The knock on impact to other local businesses such as restaurants and retailers has been devastating. They'll get through the summer just because of the increase in tourist traffic. But the fall and winter are going to hurt. While there are things that could be done to save the heart of the Loop, the Combine does not have the imagination, guts or fortitude to do what needs to be done and I suspect the Loop will once again resemble what it was back in the 70s in the not too distant future.
The LaSalle corridor is my favorite too. I spent my whole career within 1 block of the CBOT except for my time at the very end when they moved my office by the Ogilvie center. I hated working away from LaSalle Street.
I used to work on a remodeled floor in the 135 building, but it still had the original black and white checkerboard tiled bathrooms from 1930 like the CBOT building had. Not good. The footprint of that building made for small offices, which is not appealing to new tenants. What does the lender do with a non-viable building like that? Who do they give it back to? I guess it just gets abandoned eventually for nonpayment of taxes. That building has a huge property tax bill, too.
The Harris/BMO building is going to be leased by the State of Illinois for workers from the Thompson center, so that building will soon look like a public housing project inside.
Another building I worked in, the old Insurance Exchange at 175 W. Jackson, was also given back to its lender by Brookfield Properties. They bought it for $305 million in 2018 even though it was only 67% leased. When I worked there that building was a dump, but after it’s expensive renovation it was beautiful. It’s interesting that they couldn’t lease it out because it has large floors, but with the demise of the trading floors and being on the edge of the Loop, I guess it was harder to do. Amazing that a major property owner like Brookfield gave up and ran away in only 4 years, but it’s indicative of where the downtown is headed.
Here is the weekly office occupancy rates from Kastle Systems, which maintains building security entry systems nationwide. Chicago is only at a 42% occupancy rate. The downtown will not recover if office workers never come back to something close to full occupancy. https://www.kastle.com/safety-wellness/getting-america-back-to-work/
Once a city loses its vibrancy, it’s done.
The Kastle swipe data my be more indicative of my point on how many people are coming into the office on any given day. My 20% number came from a recent press release. I think it might have been JLL data. The bathrooms at 135 were something that had been mentioned to me a couple months ago. Apparently, the issue was that building codes require that if you upgraded a single bathroom they had to be upgraded throughout the building. I can't imagine it is anything other than a favor to the plumbers union. Now it is a blockage to anything being done. I've heard that an investor was considering buying the property to turn it into student housing.
The renovation costs have got to be crazy on those old buildings. The lobby is beautiful at the 135 buildings, but the rest of the building is not. Even the HVAC was inconsistent in our “remodeled” office.
The developer who bought the Harris 115 LaSalle building bought it at a 33% discount to its asking price from the lender. He is putting in 12 floors of offices for state workers and 500 apartments above that.
That area can be pretty empty and forbidding at night, especially with the increased downtown crime. I can’t imagine wanting to live there.
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One last post-script: I got my hair cut yesterday. Been going to the same place for 25 years. Before my appointment my stylist (I use that terms only out of respect, theres not a lot of style to my short cropped hair) went to the back and I heard a celebratory yell come from the back room. A little later, while getting my hair cut, one of the others walked in with a bottle of wine.
Curious, I asked Barb ('ll call my stylist Barb to keep it simple), what was up. She confided in me that they had been in longtime negotiations over their rent. The retail spaces on either side of them are vacant. I imagine much of the office space in the extremely old building is as well. After doing more digging I learned that, in fact, they were actually negotiating with the bank. The landlord had turned they keys over long ago. Despite surviving the pandemic, this business, which had been there for 25 years, was looking at being kicked out of their space. Due to the factors we discussed above, they have still not come close to recovering the customer volume they had pre-pandemic. They are struggling. And the bank was actually going to let them leave, losing a reliable stream of cash flow rather than negotiate a reduced rent rate.
And I just happened to be there when they got the news that the bank agreed to negotiate the rate. And ALL of the employees were in a celebratory mood. I've known the current owner and Barb since they started working there. I knew the original owner since before she opened this place. You could see the relief on all their faces. All this time I suspected, but just did not realize how close they were to being booted.
The bank is clearly in trouble with this asset. As are many of the retail businesses that are still operating in the Loop. There are a whole lot of shoes yet to drop. I think we are only in the 2nd or 3rd inning of this very long game.