Chicago’s office market remains oversaturated with vacant space, but two River North office buildings are being primed to become apartments.
The properties, both on West Illinois Street, underscore how — and where — office demand has shifted in the city post-pandemic. The two conversions could create more than 100 new apartments in River North, when nearly a quarter of the office space in the North Side neighborhood remains unoccupied.
The real estate and property management company Mo2 Properties plans to convert the loft-style office building at 116 W. Illinois St. into 36 apartments. The building, spanning the addresses 116-122 W. Illinois St., was owned by the Boylston family for more than 100 years and bears the family’s name on the front.
There’s retail on the ground floor, which Mo2 will keep. While the retail offering remains viable, the office portion of the building was only 40% occupied when Mo2 purchased it in August, said Ken Motew, principal of Mo2. Property records show the company paid $3 million.
Motew said the conversion project is in line with what the company does. Mo2 has completed adaptive reuse projects on the North Side for more than 30 years.
“It’s a loft building that literally fits pretty easily to convert to residential, where we don’t have to add light wells or anything,” he said. “We don’t have to go in for a zoning change … so it was kind of a perfect fit for what we do.”
The units — which include one- and two-bedrooms — will have market-rate rents. The majority of apartments will have two bedrooms and two bathrooms, Motew said. Construction will likely start in May 2025 and wrap up a year later, he said.
The building at 116-122 W. Illinois St. in River North will soon be converted into an apartment building by developer Mo2.
Tyler Pasciak LaRiviere/Sun-Times
Motew thinks projects like Mo2’s will help revitalize River North. The neighborhood’s office vacancy rate hit 24.8% during the third quarter, compared to 20.3% for the same period last year, according to real estate firm Bradford Allen.
“I think that it’s a good thing that [Chicago is] allowing the conversion of office buildings … into residential, which is adding a lot of units to the downtown area,” Motew said. “I just hope that the retail comes there and that it becomes vibrant — back like it was.”
Across the street from Mo2’s property is the former Salesforce office at 111 W. Illinois St., where a second conversion is expected to occur. Chicago Development Partners has been in talks to buy the office portion of the property and marketing materials from Cushman & Wakefield said the space could accommodate up to 145 apartments, according to CoStar, which estimated the sale at $17 million.
Chicago Development Partners Principal Howard Weiner did not respond to requests for comment.
A sale hasn’t yet closed on the building, but Colliers executive vice president Dougal Jeppe said the conversion of the mostly vacant property is “likely going to happen.”
Salesforce moved out of the 10-story building to take up residence at the 60-story tower in Wolf Point, near the Merchandise Mart, that bears its name.
The last time the building traded hands was in 2015. At the time, it was sold to foreign real estate firm GLL for $75 million. GLL was acquired by Australia-based financial services firm Macquarie in 2018.
Jeppe said the former Salesforce building has a nice facade and office space, but it lacks the trendy amenities at many newly-constructed office buildings.
“I’ve looked at that building for office tenants, and it’s interesting. But they’re like … ‘Is this the place I want to be to draw employees back into my office, when I can go two blocks south and get a multi-tenant building where they literally have a full floor of just amazing amenities, and it’s less costly?’” Jeppe said. “That one is likely going to be trading and converting.”
Proposed conversions have been picking up steam this year, with the city’s La Salle Street Reimagined program leading the charge. More than 1,000 new apartments, including more than 300 affordable units, will be added to the La Salle Street corridor, replacing struggling office buildings. The city projects 1.3 million square feet of vacant space will be converted through the program.
The Chicago Plan Commission also approved plans last week to convert the majority of 500 N. Michigan Ave. into 320 apartments.
Jeppe predicts more apartment conversions will happen in Chicago — it’s just a matter of finding the right buildings, he said. Factors like good natural lighting, a live-work neighborhood, floor plate size and column placement can make or break an office building as a candidate for residential conversion.
“There’s too much office product on the market,” he said. “We need to see some of those buildings just kind of go away — either get converted, taken down by the city and turned into green space, some kind of other entertainment use or purchased at a very discounted number so that that new owner can come in and do really low cost deals.”