The Big Chill: Chicagoâ€™s Condo Market Is Now on Ice
It's part of a contemporary vision to create sustainable living downtown. But now vacancy rates are soaring. There are 6,000 unsold homes downtown. And that's left many people questioning whether that vision is sound.
Tucked behind a wall of skyscrapers just northeast of Millennium Park is a little urban oasis. It's a six-acre park with a kids' playground and a dog run – and it's part of a huge new development called Lakeshore East.
Ambi: Dogs barking
Susan Silinsky is hurrying to get to the Blue Cross building where she works, just on the other side of the park. She's one of thousands of people who have swapped suburbia for skyscrapers over the past decade. Silinsky says she was bored out of her mind in north suburban Vernon Hills and couldn't wait to move to her high-rise condo.
SILINSKY: We've moved there a little over two years ago, but honestly I've had that spot picked out for 12 years at least.
GROSS: It didn't exist.
SILINSKY: I know. But I was just waiting for the developers to come in, and it's fantastic.
Lakeshore East was a small golf course until 2002, when Magellan Development bought the property. Now there are five highrises here and another one almost done.
Ambi: Concrete pouring sound and cheering
Eighty-two stories above ground, Magellan executives cheer as they pour concrete for the final floor of the Aqua building. It's a slim tower with balconies that ripple like waves. And it's hit a sweet spot - already 98-percent of the condos have sold. The fact that the building exists at all is kind of a miracle. Magellan co-CEO Jim Loewenberg says they got the construction loans in 2007, right before banks stopped lending.
LOEWENBERG: The whole issues were starting to come to a head, the banks were starting to not trust each other, and so I just don't know if it would have been done if it had been 60 days later.
That credit collapse sent downtown real estate into freefall.
AUCTION: 480, 490, 490 left side, now 500,000, five from the back, now 510....
Downtown just witnessed its first-ever auction of luxury condos. And there may be more.
AUCTION: 557, once twice, I have 556, 557 third and final call, 557? Sold, congratulations, 556,000. Buyer number is 467.
That penthouse in the South Loop went for almost 40 percent off. The South Loop exploded with growth during the boom. But it now has the most unsold condos of any neighborhood downtown. Until recently, downtown prices hadn't dropped much, but sales were pretty much frozen. Developer Thomas Roszak says he put dozens of his condos on the block as a way to thaw the market.
ROSZAK: No one's selling anything right now. Today we're going to prove there are 40 buyers out there and they're all willing to buy at a certain price, so from today on, everybody out there who's a seller will have to react to the price we just determined today.
People may be willing to buy at a certain price - whether they can get loans is another matter. Mortgages of more than 400-thousand dollars are hard to come by these days. That could delay a recovery. In the meantime, the city is left with some of the collateral damage.
Ambi: Traffic sound
GROSS: I'm standing here with Benet Haller, who's the director of urban design and planning for the city of Chicago and we're standing in front of what was going to be a supertall condo and hotel building, the Waterview Tower and Shangri-La hotel, which is now just kind of a hulk of unfinished concrete. There is some activity going on here but they say they're just cleaning up to mothball the place. So Benet, what does the city do with something like this?
HALLER: Well certainly this is one of the last outcomes we want is when a building stops halfway through construction. But it is kind of the nature of private development that occasionally you'll get a project or two that does stop midway through, but we certainly expect this is just a transitional state to something else, absolutely.
Even as workers pack up this site, it's still plastered with ads for million-dollar condos. Haller says that's not far-fetched – long-term. He's working on a 10-year plan to make downtown more livable. It calls for everything from more sidewalks along the river to better transportation. Haller says this kind of downturn can be good – especially for city planners.
HALLER: It's good for planning in so far as you do have a break and you do have people asking fundamental questions about the nature of cities, and that's actually the best time to talk to people about what our vision looks like, and I will mention the Burnham Plan of 100 years ago – that was also a plan in an economic downturn.
Haller says he has no doubt the empty homes downtown will be sold. And Gail Lissner agrees. It just won't be very soon. Lissner analyzes downtown real estate for Appraisal Research Counselors. She says in the fourth quarter of last year, more people backed out of condo contracts than bought - resulting in negative sales.
LISSNER: Certainly it's been painful. Yes, the numbers are much bigger this time around. And that's certainly consistent with everything we're seeing in the financial markets. So I think it will take a little longer and it may come back a little more slowly, but definitely it will come back.
That's a comforting thought to Suzanne and Wesley Muirheid. They just moved into a West Loop condo a few weeks ago.
Ambi: Knocking sound and door opening
SUZANNE MUIRHEID: Hi, are you Ashley?
GROSS: I am.
MUIRHEID: I'm Suzanne.
GROSS: Hey, nice to meet you.
The Muirheids say they love their new glass and concrete home. But they've just found out that many other people who had signed contracts in this building now can't get loans. Suzanne says she's worried it could stay half-empty.
SUZANNE MUIRHEID: I'm not sure we would have walked away knowing this as well because we bought so long ago – it's been building up for over a year, but if we had known everything we know now, I don't know – that may have played differently. And I just feel that the building's getting a really bad reputation.
She says they plan to stay at least four or five years, and she's not so worried about their investment long-term.
SUZANNE MUIRHEID: The location is wonderful and I think as soon as things sort of steady out, I don't see why people wouldn't want to move to this building. So, short-term yes, long-term no, I think we're going to be fine.
And in the meantime, she and her husband plan to enjoy all the perks of their new building – the pool, the dog run, the workout room. They may just have them more to themselves.