THE LOOP — Google’s $105 million purchase of the Thompson Center in 2022 marked a turning point for Chicago’s struggling financial district. Plagued by high office vacancies and dwindling foot traffic, the area is now being primed for city-backed residential projects and the arrival of thousands of Google employees.
While completion of the projects is at least two years away, early signs suggest the revitalization will reshape the Loop’s future and could spur an economic boom, industry experts said.
“I think a small boom is fair … people didn’t expect what happened to Fulton [Market] until Google came there, and then it took off like the Wild West,” said Andy DeMoss, senior managing director at Bradford Allen, a Chicago-based commercial real estate and investment firm.
Developers, investors and real estate executives have been watching the market closely after the tech giant announced in 2022 it would redevelop the Thompson Center for office use. Capitalizing on the spotlight, former Mayor Lori Lightfoot announced the Revitalize LaSalle Initiative, which offers up developers tax-increment financing (TIF) dollars and other incentives to repurpose historic buildings along LaSalle Street.
The idea leans into the concept of the Google Effect: a spike in investment around the Thompson Center as developers create housing and convert buildings for an influx of Google workers.
The LaSalle Street initiative was delayed during the transition from Lightfoot to Mayor Brandon Johnson but officially moved forward in the spring with five adaptive reuse projects making their way through the city’s development and TIF approval process. If approved by City Council, the projects would collectively use $150 million in TIF funding and add at least 1,000 apartments to the area. The target completion date for the five projects is the end of 2026.
Simultaneously, renovations on the Thompson Center have progressed and now include a revamp of the Clark/Lake ‘L” station. The entire overhaul is slated to also be done in 2026.
Shifting Priorities In Real Estate
Office vacancies Downtown remain high as companies downsize or eliminating their office spaces entirely. Downtown office vacancies were at 25 percent in third quarter 2024, according to a report from Chicago real estate Bradford Allen, a Chicago-based commercial real estate firm. At the start of the pandemic, Downtown had a 13.8 percent vacancy rate, according to Crain’s.
Meanwhile, the market for office space has evolved. Companies now prefer modern buildings with high ceilings and open, contiguous floor plans — a stark contrast to the historic skyscrapers that define the Central Business District, said Alan Barker, architect and residential market leader at Lamar Johnson Collaborative.
What happens to century-old buildings with no tenants? Adaptive reuse is a logical solution, though developers require assurance that their multimillion-dollar renovations will succeed.
The arrival of Google and TIF subsidies for residential conversions have signaled that the city is betting on Downtown revitalization, said Michael Fassnacht, chief growth officer at Clayco construction firm and former CEO of World Business Chicago.
Chicago has been recognized as offering some of the “most generous subsidies” in the United States, according to the Wall Street Journal, and developers have taken note.
“You can see that in all the responses to the LaSalle Street Reimagined [request for proposals]. A lot of developers teamed up with architects and building owners to pursue this because the city has created the structure and incentives,” Barker said.
Barker’s firm is working with The Prime Group on 208 S. LaSalle St, one of the five adaptive reuse projects proposed to receive TIF funding through the LaSalle Street Reimagined initiative. If approved, the project will include 226 upscale apartments, 68 of which will be affordable. The apartments would occupy space between the JW Marriott Hotel on the lower levels and the LaSalle Hotel on the upper levels.
Combined, the LaSalle Street Reimagined proposals and the Thompson Center redevelopment could absorb over 2.5 million square feet of vacant office space, reducing competition and transforming the business district into a livable neighborhood.
“The conversions create the 24/7 live-work environment, which may attract a different type of retailer and more entertainment options, further fueling energy and demand in the area,” DeMoss said.
DeMoss’s firm has shown office space to at least two Google vendors interested in leasing in the corridor, he said. Amorino Gelato and Belvedere Bar have recently leased retail space on the ground floor of the historic Rookery Building at 209 S. LaSalle St., and a new restaurant is slated for 120 W. Madison St.
“Some retailers are getting ahead of Google and residential conversions,” DeMoss said. “Retail was completely dead in the Loop, but this year, we’re starting to see it come back. It will significantly pop once those events happen in a couple of years.”
Nearby, Italian Village Restaurant is also betting on the Loop’s future. The fourth-generation owners recently opened Sotto in the basement of the sprawling restaurant at 71 W. Monroe St. to attract a younger crowd.
“This is the time it’s actually going to become that diverse and vibrant neighborhood people have been talking about,” said Jonathan Capitanini, co-owner of Italian Village. “We think we’re still maybe a year or two from the Loop catching that flywheel, but some things will come online sooner.”
Capitanini, who has a background in consulting, told Block Club Chicago he’s hoping the restaurant will be able to capitalize on the “first mover advantage” as soon as new neighbors and workers move to the area.
“The one thing we know for sure is that you don’t bet against the Loop. It will recover. It will just change forms,” Capitanini said.
Financial District The Next Fulton Market?
As the LaSalle Street corridor continues to transform, other adaptive reuse projects have started to pop up elsewhere Downtown, without the promise of TIF subsidies.
City Council has already approved recent proposals for office-to-residential conversations at 65 E. Wacker Place and 500 N. Michigan Ave. In addition, Clayco and the Prime Group recently purchased 35 E. Wacker Drive, though the building’s fate is not yet decided, Fassnacht said.
But with the rising cost of construction and demolition rare for Downtown buildings, developers and building owners are turning to adaptive reuse to buy into Downtown’s potential revitalization.
“Savvy owners and developers are always looking for the highest and best use of a property. Often, with older office buildings, that’s residential conversion,” Barker said.
Historical and older buildings tend to be good candidates for adaptive reuse. Often built before air conditioning was available, these buildings have numerous windows and smaller structural bays that convert well into residential units.
But historical buildings can sometimes be too expensive to convert because of the cost to bring them up to code for residential use, said Bill Stephan, project executive at McHugh Construction. For example, adding sprinklers can cost $250 a square foot.
Until recently, a big barrier for developers was the cost to replace windows to comply with the city’s building code, which requires windows to have the ability to open for fresh air and ventilation. Now, thanks to a pilot program launched in November by the city, adaptive reuse projects over 80 feet high can rely on mechanical ventilation, with some limitations.
“Some of the projects that we were budgeting were postponed because of it was out of budget. We have been asked to relook at those buildings again with this new pilot program and see how much less expensive it will now be,” Stephan said.
While the city is spending millions in subsidies to prepare for the eventual arrival of thousands of Google employees, Fassnacht says officials shouldn’t slow down now. The success of projects like the Thompson Center and LaSalle Street Reimagined hinges on the development of a thriving urban environment.
“Google moving into the Thompson Center is a huge win, but we can’t take it for granted. The success depends on how we create an amazing environment for their employees and attract even more investment,” Fassnacht said.
Branding the financial district similar to the Fulton Market District holds potential for the area, Fassnacht said. Fulton Market has become one of the city’s most popular neighborhoods, drawing locals, visitors and workers to its trendy restaurants, luxury residential buildings and office spaces.
“Fulton Market was not a term 20 years ago as a livable neighborhood. So if you look globally, any cool neighborhood that comes up becomes the identity, gets a name, gets branded and is being then kind of talked about,” Fassnacht said.
While Fulton Market had almost limitless development potential, the Central Business District doesn’t because it’s already built out, DeMoss said.
Still, DeMoss believes there is room Downtown for a smaller-scale, Fulton Market-like boom.
“Central Loop, you’re already starting to see it with the conversions. Now that, plus Google, are going to prompt a lot of changes, including ones that people can’t anticipate yet, which I think is what happened in Fulton [Market],” DeMoss said.
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