The rebirth of mixed-use
Chicago's residential construction boom is bringing back a bygone era: a home above the store


Publication: CHICAGO SUN-TIMES
Date: December 5, 1997
Author:  BILL RUMBLER AL PODGORSKI  
Section: HOMELIFE
Edition: LATE SPORTS FINAL
Page: 1
Word Count: 1566

Living above the store is becoming more popular. So is living above the office. Make that living above a store or an office or
both. That's because mixed-use developments are becoming more and more popular from Michigan Avenue to the suburbs.


Developers more often are adding a retail component on the first floor(s) of loft projects and high rises, and more
single-family projects are including a commercial section.

In the River North area, Erie Centre not only will have retail on the first floor but the commercial space will be condos, too.

In the Fulton River District far from Michigan Avenue, Randolph Place will contain restaurants and retail.

But you don't have to look downtown to find mixed use. Take the two-story Plaza Vista condos at 2840 N. Lincoln, for
example. The condos are being built over two levels of retail on a traditionally commercial street.

Mixed use is even cropping up in the suburbs. Take Skokie Town Square, where 95 units (priced from $140,000 to
$251,000) sit atop first-floor retail at 5000 Oakton Street in the central business district.

Constructing apartments above the store is not new, of course, as it was commonly done throughout the city and older
suburbs until after World War II. Then separation of uses became the watchword, and shopping centers and strip

malls multiplied.

Water Tower Place and the John Hancock Building revived the mixed-use idea decades ago on Michigan Avenue, the
former having a big dose of retail to go along with a hotel and condos and the latter stressing offices, with residential on top.

"Our penchant to separate land uses via zoning is, at best, out of date," said Prof. John F. McDonald of the Center for
Urban Real Estate Institute at the University of Illinois at Chicago. "The desire to keep residential separate from other uses is
obsolete."

Choice sites having dwindled on Michigan Avenue, developers are bringing the mixed-use concept to other parts of
downtown. MCL Cos. is planning a huge River East development between Grand Avenue and the Chicago River. At least
one of the buildings is expected to have a combination of retail, movie theater and hotel topped off with residential.

It doesn't necessarily have to be developers putting coffee shops and dry-cleaners on the bottom floor. The opposite can
happen in the form of an old office building seeing its top floors turned into condos.

Such is the case at 330 S. Michigan, where the top six floors are being converted, and the bottom 20 floors will remain
office. Such projects might be the wave of the future downtown, said Herb Emmerman, president of Equity Marketing
Services Inc., consultant on the project.

Another such project is on the drawing boards at 1550 S. Indiana, where the top three floors of a six-story building are
being converted to condos by Wolverine Cos. The bottom three floors at Penthouse Lofts will remain as commercial, with
offices, a health-care company and a coffee shop.

Why, after decades of limited use, is mixed-use having a rebirth? There are several reasons, all or some of which might
apply to any given project.

Finding the best use. Commercial typically is the highest and best use of real estate, as it brings in the most rent, assuming the
location is viable. Developers more frequently want retail in their projects to help defray the high costs of land, said Keith
Lord, of Lord Cos., a consultant to developers on the retail aspect.

In contrast to the past, retail today is being given equal footing in design considerations so that it rents or sells quickly, said
Lord, who noted that he's working with 20 different developers on mixed-use projects.

One of those is Erie Centre, 375 W. Erie, in the River North neighborhood, where five commercial spaces are available in
the loft and tower sections of the development.

Since the developer, Chicago Urban Properties, wants to sell off the entire property, the 10,000 square feet of commercial
is being sold as commercial condos, said John Mullen, president of Chicago Urban, a subsidiary of Sundance Homes, a
suburban home developer.

The unfinished commercial space is priced at $100 to $110 per square foot, compared with an average of $160 a square
foot for finished residential space in the rest of the project, he said. (Lofts range from $120,000 to $303,900, and tower
condos go for $130,000 to $490,000).

As far as the commercial condos go, "it looks like they're moving extremely quickly. In fact, I've never seen something move
so fast in retail in 12 years," Lord said.

That's because retail rents have risen an average of 30 percent in the Loop and North Side in the past months; on Oak
Street from $80 to $130 a square foot in the past 18 months, and on Michigan Avenue from $200 to $275, he said.

Room for guests. Adding a big retail component or a hotel is a solution to a potential absorption problem in a very large
building, said Gene Stunard, president of Appraisal Research Counselors Ltd., a consultant to developers.

Without a brisk market, buildings with hundreds of condos might take too long to sell out, with the developer, in effect,
paying the mortgage on the unsold units. "If the meter runs too long, it can wipe out your profit," he said. Mixed-use can help
prevent this. As examples of large projects that took too long to fill up or sell out, he cited Presidential Towers on the West
Side, Marina City downtown and the conversion to condo of the American Furniture Mart on Lake Shore Drive, which
took five years to fill up.

Randolph Place in the Fulton River District has 285 condos (selling for $129,000 to $400,000), restaurants, other retail and
a planned hotel. But negotiations on the hotel have hit a snag and the idea might not come to fruition, said Michael Lerner,
president of MCZ Development Corp., the developer.

If the hotel deal falls through, he said, he'll gladly create more condos, which will number near 400 without the hotel. The
market has been so strong that nearly half of the 285 in the original plan have sold since late September.

Retail helps housing. A heavy dose of mixed-use is proposed for at least one of the buildings in River East, but retail income
is not the reason why, said Dan McLean, president of MCL Cos., the developer.

He believes retail is an enhancement that makes residential more in demand. The retail would be along Illinois Street, which
leads past North Pier to Navy Pier. Only a couple of the proposed residential towers would be on top of retail (plus a
hotel), with the great bulk being east and south. All residential would be within walking distance of the retail.

A similar concept is being used in another MCL project, Old Town Square at Division and Clybourn streets on the Near
North Side. Some 57 percent of the land in the project is being devoted to retail complexes anchored by a Dominick's
supermarket.

Retail is in strong demand in the area, but it's also included to make the area a full, rounded community attractive to current
home buyers, McLean said.

Houses in the project start at $366,000 and town houses sell for $288,180 to $345,900. The only condos left are
1-bedroom units that start at $124,900.

David J. Dubin said he is building mixed-use at 2840 N. Lincoln Ave. not only because it's profitable, but because it's easier
to build than residential.

A long-time residential developer, he's found it difficult and too expensive to build on side streets in the Lake View
neighborhood, so he looked at land along Lincoln Avenue that was zoned commercial with residential allowed above.

To build only residential, as other developers on the street have done, would have required a zoning change. To build
mixed-use required no changes, so he's got 17 two-story condos perched on top of 7,200 square feet of retail on two
levels. One of the parking levels will be for retail customers. The condos, located 20 feet above street level, are priced at
$239,900 to $349,900.

Old office glut. Then there's the counter trend, and it has to do with the situation with office space. The city's older, more
poorly situated office buildings (called Class C buildings) are having trouble keeping tenants and maintaining the buildings,
which typically have retail on the first floor. If they raise rents to help with maintenance, they probably will lose tenants.

A few of these buildings have been converted to lofts, but it's not an option with the overwhelming majority, Emmerman
said. That's because the lower floors don't have the light and views that make residential saleable. But perhaps the top floors
do have desirable features and could be sold as condos. The office building at 330 S. Michigan is pioneering the concept
downtown. The top six floors of the 20-story building are being converted to luxury condos costing $134,900 to $429,900.
Talk about amenities: How about living down the street from Symphony Center and the Art Institute?

In this case, the highest and best use of the top floors is residential, thanks to the glut of Class C office space on the market,
Emmerman said.
David Dubin said his mixed use development at 2840 N. Lincoln Ave. is easier to build than residential. Commercial units
are being sold in River North's Erie Center said John Mullen of Chicago Urban Properies. David J. Dubin stands outside the
site of his mixed-use development at 2840 N. Lincoln Ave. Condos are priced $239,900 to $349,900. Graphic; See roll
microfilm.


Copyright 1997 Chicago Sun-Times, Inc.