As Mentioned in Crains
Crains Chicago - Dennis Rodkin
The 2020s have been lousy for the downtown condo market
Crime, closed stores and restaurants and a slow return to offices have dampened demand in the city's glitziest condominium corridors.
Eighteen years ago, when they both worked downtown, Gail and Charles Zugerman bought a condo at Michigan Avenue and Huron Street for $1.3 million.
Within a few blocks, “there was so much to do,” Gail Zugerman says. “Museums and restaurants and night clubs and stores. It was a fun place to call home.
Now retired—she from market research, he from medicine—and living in Florida, the Zugermans have their Michigan Avenue condo on the market at just under $1.05 million. That’s 19% less than they paid for the three-bedroom unit.
They started out higher, at almost $1.4 million, but that was in June 2020, the early days of the pandemic, when most offices, cultural venues and retailers were shut down tight. In the two years since, the situation downtown has deteriorated, with frequent news of smash-and-grab thefts, shootings, rowdy crowds, store closings and COVID surges that have slowed the return to in-office work.
“We got slammed,” Zugerman says. “From COVID to crime, everything that could go against us has gone against us. I hate to see it, because Chicago is such a great city.”
The Zugermans are not alone. The 2020s have been lousy for most of the downtown condo market. Except for the white-hot West Loop, downtown neighborhoods have lagged behind a boom in housing markets across the city and suburbs. The perception that crime is rampant is a major factor, agents and others say, but there are others, all inter-related, including the slow return to downtown offices, the decline of retail and the rise in property taxes.
“It’s decimated demand,” says Dan S, the agent representing the Zugermans’ three-bedroom, 2,880-square-foot condo. “Seeing news reports about people getting pick-pocketed, carjackings, gangs of kids messing with people who are just walking down the street—that absolutely has started to impact home prices.”
Here's what else it impacts: the image of downtown Chicago as a paragon of urban living, one of the city’s finest showpieces. If interest in living there declines, along with the interest of visitors to focus their stay there, it’s not only a loss of luster but a diminishing of the pipeline of investment—in new residential buildings, restaurants, cultural amenities and more—that has kept the city looking fresh as other, smaller Midwest cities fade.
Supercharged demand for homes has been a signal characteristic of the pandemic era, with high-rising prices the result. The median price of homes sold in Chicago rose about 39% between January 2020, prior to any pandemic impact on the housing market, and April 2022, the latest data available on Redfin, the online real estate marketplace. For condominiums only, the increase is about 22%.
Figures for the downtown neighborhoods show a stark difference from the rest of the city.
The median price of condos sold in the Gold Coast in that same 28-month period went down 1%.
They’re up, but weakly compared with the city overall, in Streeterville (up 8.4%), River North (3.8%) and the South Loop (up 7.8%). Data for the Loop shows the median sale price rising 13.3%, a figure that is likely skewed upward by multimillion-dollar closings at the new St. Regis tower in Lakeshore East.
“It’s sad to see,” says Kristine Farra, who heads Gold Coast Exclusive Real Estate. “You’re seeing double-digit appreciation in the suburbs, and good for them, but downtown it’s completely different.”
Crime is the biggest culprit, say Farra, Straus and other agents. While there’s crime all over the region, and the country, it’s been more sensational in and around downtown, with roiling crowds at North Avenue Beach and Millennium Park in recent weeks, a Loop shooting that caused producers to cancel a performance in a theater on Randolph Street, and a fatal shooting in Millennium Park.
Because of all this, “buyers are still worried about living downtown,” says Susan , a downtown firm, “especially those empty nesters who would normally be coming downtown at this time in their lives.”
Restaurateurs say they’re feeling the impact of declining interest in living downtown. “Some customers in Streeterville have commented that they don’t feel comfortable coming out at night and walking to a restaurant,” says Jack Weiss, whose two Coco Pazzo restaurants are on Hubbard Street in River North and Ohio Street in Streeterville.
“It’s just not the sense of comfort and safety that they had years ago,” Weiss said. With retail vacancies and crime, it’s lost some of the patina it had.”
None of this is to say that the downtown condo market is dead. There have been big marquee sales this year like the $20 million Trump penthouse, a $17 million sale at No. 9 Walton Street and three St. Regis condos at $8 million or more and four more the developer has marked as pending sales. Inventory is low compared to the worst part of the pandemic: condos for sale in the downtown neighborhoods would fuel about five months of sales, although even that healthy figure is nearly twice the citywide figure of 2.6 months.
Gwen H a Chicago agent, says some buyers see opportunity in the slow-growing prices downtown. In Water Tower Place, for example, the sellers of a 71st-floor condo are asking just under $1.1 million, about 21% off the $1.4 million that they paid for it in 2005.
“If you’re a long-term fan of the city, you know it’s going to come back, and you buy now for the long term,”