In a sign of the times for Chicago lodging assets, Northwestern Medicine is swapping out downtown hotel rooms for healthcare space.
Northwestern submitted a proposal to convert the fifth and sixth floors of the Hyatt Centric Chicago Magnificent Mile hotel into medical offices and connect the space to the existing hospital next door via a skybridge, Crain’s reported. The proposed project would create about 41,000 square feet of medical offices to meet a growing demand for outpatient medical clinics downtown.
The healthcare system bought the 17-story hotel, located at 633 North Clark Street, for $67.5 million earlier this year. Northwestern plans to eliminate 74 rooms from the hotel to add the medical space and build a pedestrian bridge over Erie Street that connects the second floor of the hotel to the hospital’s Galter Pavilion outpatient care center at 675 North St. Clair Street.
When Northwestern bought the hotel, it indicated the ultimate plan was to expand the hospital. The hotel serves as a place for patients and their families to stay on campus while receiving care, and also hosts conferences and events.
The proposal reflects the post-pandemic trend that has seen hotels in Chicago struggle more than assets in warm-weather states to recover from the travel lockdown, while demand for medical office space has continued to rise. Chicago-area additions to medical office supply outpaced the average expansion in major markets across the rest of the nation by 5 percentage points over the last decade.The Chicago metropolitan area added more than 4 million square feet in the sector during that time, an 18 percent increase.
Chicago’s City Council will need to sign off on the Northwestern project since it requires rezoning the hotel property to allow for medical services. In addition, Northwestern’s plans for a diagonal crossing pedestrian bridge will also require a zoning change.
Northwestern paid a relatively low amount for the leasehold interest in the hotel property — the first hotel purchase for the 11-hospital healthcare system — because the sellers, a venture of Irvine, Calif.-based Sunstone Hotel Investors, were in the process of leaving the Chicago market entirely.
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— Victoria Pruitt