Why are 62 acres so close to Chicago’s Loop even available?

There has been a lot of talk about a new project on 62 acres on the Chicago River just south of the Loop. Before we get to what will go there, why was such a big piece of property empty near one of the major centers of the world?

The South Loop property was used as a rail yard, but has sat unused for decades.

The scraggly land was later owned by Antoin “Tony” Rezko, a former fundraiser for imprisoned Gov. Rod Blagojevich who himself served a prison sentence after a fraud and money laundering conviction. The site was sold 10 years ago to Luxembourg-based General Mediterranean Holding, a firm led by Iraqi-born and British-based businessman Nadhmi Auchi. He was convicted in a French corruption scandal in 2003.

Last May, Related completed a city-approved deal to take over as lead developer, with Auchi’s firm remaining a joint venture partner.

From the city’s perspective, Related’s involvement brought credibility to the long-idle site. Related Midwest is an affiliate of New York-based Related Cos., which is building 18 million square feet in the Hudson Yards mixed-used development in Manhattan.

One thing that is striking about Chicago and some other Rust Belt cities is the amount of available or empty property. In particular, Chicago’s South Side has a number of large parcels including this site along the Chicago River, land southwest of McCormick Place with some small developments here and there, land on the Robert Taylor Homes site with a few buildings here and there, and the former US Steel site (and subject to a number of proposals in recent years – see the latest here) plus numerous empty or vacant properties scattered throughout neighborhoods. Even while development booms in certain neighborhoods (and the city trumpets the work taking place in the Loop), others have significant chunks of empty land.

The why: these properties are often available in poorer or more industrial neighborhoods and the properties are often located in or close to areas with higher concentrations of black residents. In other words, these properties are not desirable, even at cheap prices (such as $1 properties in Chicago), and the desirability is connected to the status of the location and the status of places in the United States is closely related to race and class. This particular 62 acres is a great example of how uneven development works; those who want to build (leaders and developers/those in the real estate industry) usually do so in order to profit as much as possible. Now, this 62 acre site is more desirable (meaning profitable) because the South Loop has done well in recent years and there are other new developments nearby.

Buying vacant Chicago lots for $1

Many Rust Belt cities have plenty of empty land and the city of Chicago is selling some of these lots for $1 a piece:

In an effort to combat urban blight and the illegal activity that often follows, the City of Chicago has announced a major expansion of its Large Lots program that offers empty city-owned parcels to nearby homeowners for just $1.

After debuting in Englewood and East Garfield Park in 2014, more than 550 homeowners have so far taken advantage of the program. Now, thanks to its recently expanded scope, Large Lots will extend to 33 Chicago communities on the West and South sides, offering 4,000 empty properties at the extremely discounted rate…

Not just anyone can swoop in and grab real estate for a buck, however. To purchase a lot, buyers must reside on the same block, be current on their property taxes, and be in good financial standing with the city in order to be eligible. Large Lots will be accepting applications on its website through the end of January.

The city tells the Chicago Tribune that all lots in the program are reserved for residential uses such as extended side or back yards, gardens, parking pads, or landscaped green space. In addition to improved neighborhood aesthetics, the Trib also cites a study that found the program yielded a notable drop in nearby littering, drug activity, and prostitution.

Eliminating empty properties is probably a good first step. But, what is the next step? What is the long-term solution to reviving both these properties and neighborhoods?

I will occasionally get questions from students as to why people or businesses don’t see vacant land like this as opportunities. On one hand, the Chicago metropolitan region is in desperate need of affordable housing. On the other hand, these properties are often located in poorer neighborhoods. But, a collection of residents or organizations could really make something interesting out of cheaper properties and the city would benefit from better uses.

Suburbs ask grocery chain to fill vacant stores rather than leaving them empty

The leaders of eleven suburbs held a press conference yesterday intended to prompt Albertsons to allow former Dominick’s sites to be used:

The damaging effects of keeping these spaces vacant is very difficult for a lot of these communities,” Naperville Mayor Steve Chirico said. “We need to do a better job working together and putting the community first, and right now the communities are not being put first. We’re asking for their help. We need to see some participation.”…

However, leases on 15 vacant Dominick’s continue to be paid for by Albertsons. On Thursday, municipal officials said they want the practice of extending those leases to cease.

“When you’re leasing a space that doesn’t have a tenant and you’re renewing that lease for five years purposely so you can control whatever goes in there, that’s where we’re having an issue,” Bartlett Village President Kevin Wallace said.

Romeoville Mayor John Noak said there is interest in the vacant spaces and willingness from suburban leaders to work with Albertsons to get them filled, but the company is not cooperating.

Two quick thoughts:

  1. It is interesting to see under what circumstances suburban leaders are willing to cooperate. Common economic matters could be at the top of this list.
  2. The worst outcome for many suburbs would be that the abandoned properties are not maintained and whoever owns it is doing nothing or the bare minimum. Such buildings are not just empty; they are an eyesore and many suburbanites would say it reflects poorly on their community. This isn’t exactly the case here: Albertson’s has the leases, is paying for the property, and the sites themselves aren’t in terrible shape – they are just empty. But, large grocery stores often occupy prime retail space at busy intersections and it makes sense that communities would eventually want to see the space put back into the retail market both for appearances and sales tax dollars.

See earlier posts on this subject here and here.

Redeveloping a few closed Chicago public schools into apartments

While many of the closed school buildings in Chicago are drawing little attention, a few are being redeveloped:

In a blog post on Medium, the Chicago Department of Planning and Development (yes, the DPD apparently blogs now) offered a first look at one of these adaptive reuse projects. They offer some details on how the process works: developers express interest in a property, seek landmarking designation for tax credits and waivers, and then begin the renovation. A suburban developer, Svigos Asset Management, is currently working to renovate the Elizabeth Peabody Public School at 1444 W. Augusta Blvd. and the John Lothrop Motley Public School at 739 N. Ada St. — of which both have addresses the highly coveted West Town area. The group is also working on getting landmark status for the Lyman Trumbull Elementary School in Andersonville for an adaptive reuse project there.

The developer is renovating these schools and turning them into new residential developments. In their post, the DPD reveals photos of the former James Mulligan School being transformed into apartments. To be fair, the Mulligan School has been shuttered for much longer than the schools that were closed a few summers ago. However, the building is nearly ready to go and the DPD indicates that the building’s new owner is gearing up for pre-leasing.

Not too surprising that the ones that are more attractive to developers are ones that are in more desirable locations.

Given the response to the closing of these schools, I’m a little surprised progress has been so slow. Granted, there are other major concerns in Chicago but given the city’s debt and the need for resources in some neighborhoods, these buildings represent an opportunity. Apparently there are plans for some other buildings:

The shuttered schools that have not been sold off still belong to the city and its residents, and some neighborhoods are looking to take these buildings back as community centers, food pantries, or other uses that would serve the surrounding residents.

These could be worthwhile ideas. Is the city determined to hold on to many of these structures rather than find community partners who could do some good? All of this reminds me of some of the fate of the properties where public housing high-rises stood for decades: often located in poorer neighborhoods, this land can sit empty for years. In fact, while Detroit gets a lot of attention for empty lots, Chicago has plenty of open space in certain neighborhoods. Outside of a long-term project of a land bank, what could be done to positively utilize these lots?

Suburbs join together to find takers for vacant Dominick’s stores

Filling a big retail space can be difficult once the original tenant leaves so six DuPage County suburbs are working together to fill spaces left behind by Dominick’s:

Bartlett, Bensenville, Glen Ellyn, Naperville, Wheaton and Woodridge are combining forces to recruit potential new grocers or other large retailers that don’t already have a presence in the suburbs. The thinking behind the marketing coalition, which formed in December, is that centralizing information about several vacant Dominick’s stores could help a new business make the decision to open here.

“Since communities have different regulations and processes for business openings, that can be a deterrent to a new retailer looking to enter the market,” said Jason Zawila, a planner who coordinates economic development efforts for the village of Woodridge. “By combining our resources, we can conveniently offer the information needed for their market assessment.”

Nine of the 31 former Dominick’s that are still vacant in Chicago or the suburbs are within DuPage County. Seven are within the communities that are working together to market the sites, while the remaining two in DuPage are in Carol Stream and Glendale Heights. The stores are large — between 61,000 square feet and 77,000 square feet. And they often anchor strip malls such as Baker Hill in Glen Ellyn, Riverbrook Center and Wheatland Marketplace in Naperville or Danada Square in Wheaton.

“The concentration of remaining stores in the DuPage County area presents a unique opportunity for a new grocer to enter the Chicago market,” Zawila said.

An interesting strategy as communities can spend years trying to fill such spots (see the recent case of the empty Dominick’s at the northeast corner of North Avenue and Route 59 in West Chicago). Do the suburbs offer similar enough demographics to make the same pitch to one company? Think of the possible comparisons between, say, Bensenville and Naperville. Also, are there enough firms, particularly grocers, to take on six or more new stores at once in the Chicago region?

What happens to this coalition if a firm wants four of the six locations? I assume those four communities would accept but it could lead to some interesting relationships between suburbs.

Does demolishing buildings in Chicago actually reduce crime rates?

Chicago has pursued a policy of tearing down vacant buildings to help reduce crime but one expert doesn’t think it is making much of a difference:

Today, the city of Chicago demolished its “200th dangerous building” since July 12, according to the office of Mayor Rahm Emanuel. The mayor stated in a press release that demolitions are “preventing criminal activity in our neighborhoods.”

Is this true? “We’ve been knocking down houses since the 1930’s and it’s not clear if this has a significant effect on crime rates,” says Bradford Hunt, a sociology professor at Roosevelt University who studies Chicago housing issues…

The city murder rate has since declined, even still the number of homicides this year has surpassed 2011’s 435 total murders. Last year’s murder rate was the city’s lowest since 1965.

Chicago has traditionally been “more aggressive in doing tear downs than other cities,” Hunt says, citing Detroit as an example of a city that does not allocate crime resources to building demolitions.

In the late 1990’s, crime went down in Chicago during a spree of building teardowns, including public housing projects. But Hunt notes that the ebbing of the crack cocaine epidemic was the main cause for the 90s crime drop. Teardowns and subsequent displacement of residents have not been clearly linked to either an increase or decrease in crime.

Emanuel’s demolitions are concentrated in a few South Side and West Side police districts with high crime rates. DOB spokeswoman Susan Masell says her department works with the police department to pick buildings for demolition, looking at edifices that get a lot of 911 or 311 calls and are “structurally compromised.”

Knowing Chicago’s past regarding demolishing public housing (such as Cabrini-Green as I wrote about here and here), the continued lengthy wait lists for public housing, how the sites for public housing were chosen in the first place (generally located in already-downtrodden areas), and the shortage of affordable housing in Chicago, I suspect this is more to this story. Getting rid of these buildings might be reducing the potential for crime but it also helps clear out unsightly buildings that have little potential for redevelopment. Such buildings might take a long time to rehab or remove otherwise but suggesting they are part of a crime problem makes them an easier target.

If knocking down such buildings is so effective for fighting crime, why aren’t more cities pursuing this option?

What happens when there are 65 million vacant homes in China

A review of a new book about China leads with this information about the recent “building binge” in China:

This spring in Beijing, I asked a businessman an obvious question about the risks to China of an economic crash-landing, to which I got a less obvious reply. It is impossible to travel around China without concluding that the place is in the grip of a building frenzy. In less than a decade, China has pumped around $4 trillion into property; tens of millions of houses and apartments as well as Ozymandian public buildings and factory estates – and what hits the eye is how much of it all stands empty. Across the country, uninhabited concrete blocks scab the land, not only in the megacities of the eastern seaboard but also in the sleepier southwest; from filthy mining towns in Henan, all the way to entire ghost towns in Inner Mongolia. With an estimated 65 million homes standing vacant, residential construction last year was still running at a rate of five times demand.

Dwarfing even the $2 trillion borrowed for the Railway Ministry’s high-speed networks since 2008, and the thousands of kilometres of 4–6 lane toll roads with barely a vehicle on them, China’s building binge is the most striking example of what Prime Minister Wen Jiabao famously, but impotently, denounced in 2007 as the country’s “unbalanced, unstable, uncoordinated and unsustainable” model of economic development. Now, with house prices and sales sagging in response to government restrictions aimed at deflating history’s biggest ever property bubble, and with local governments as deep in bad debt as the developers, I asked the businessman what was to prevent the bubble actually bursting, in a spectacular financial explosion?

His answer was that it wouldn’t happen. A lot of these empty apartments, he said, had been bought by Chinese families as investments, and they would patiently hang on to these speculative purchases because interest on savings was derisory. Secondly, although some developers would go to the wall, the bubble would simply not be allowed to burst for fear of public anger as well as economic chaos. China had massive reserves if need arose, he said, and would not hesitate to bundle nonperforming loans off into a state “bad bank”. Its plans to build 36 million “affordable” homes by 2015 would also help to offset faltering private sector demand. When in a hole, in other words, the Party keeps digging.

This isn’t the first piece I’ve read suggesting that we could be headed toward a pop of the property bubble in China…