Centrum Realty & Development might have better luck selling the site of a planned office project if it opens the door to multifamily instead.
The Chicago-based firm has filed an application to rezone the River North site at 225 West Chicago, where it had approval to develop a nine-story, 123,000-square-foot office building in 2020, just after the pandemic hit and pummeled the office sector for years to come, Urbanize reported.
Centrum has hired CBRE to sell the 15,300-square-foot tract and is asking $5.75 million, almost $376 per square foot. CBRE is playing up the property’s approved development, allowing prospective buyers to bypass an arduous approval process if they were to proceed with an office project.
However, many investors and developers are steering clear of the office market these days, amid record-high vacancy of more than 25 percent last quarter in Chicago.
So Centrum is working to rezone the site to allow a multifamily development with up to 121 units. A hotel or mixed-use project would also be in play.
While Chicago’s office sector has been in the toilet since the pandemic, its multifamily market has taken off amid surging demand. Chicago led the nation in rent growth last August, rising 3.6 percent year-over-year. Rent growth slowed to 2 percent year-over-year in the fourth quarter, in part because of high interest rates, but they’re expected to rise between 3 and 4 percent for the remainder of 2024 as economic conditions improve, Ron DeVries, of appraisal and consulting firm Integra Realty Resources, told Crain’s.
The rise and fall of each asset class is further evidenced by the office-to-residential conversion craze, with developers repurposing struggling office buildings for multifamily use. Mayor Brandon Johnson recently revealed his plan to greenlight four office-to-resi projects downtown, potentially yielding 1,100 apartments.
—Quinn Donoghue
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