Chicago has long been referred to as the US’s so-called second city – usually second to New York. But the Windy City has a distinct personality of its own, and a history every bit as rich as its more familiar sister. It could be argued that without Chicago – the home of the skyscraper – there wouldn’t even be a Manhattan.
And despite some unfortunate crime trends in recent years, Chicago remains one of the most socially and economically vibrant cities in the US, and faith in the city’s ability to transform itself has been demonstrated by major blue-chip firms moving in. On the property front now comes Magellan Development Group’s Vista Tower.
On the Move
Magellan’s 96-storey, US$1 billion Vista Tower is perched on the corner of East Wacker Drive and North Field Boulevard in the Lakeshore East district. When completed in 2020, Vista Tower will be minutes from leisure and culture hotspots such as the Lakefront Trail, the Chicago Riverwalk, Millennium Park, the Art Institute of Chicago, Michigan Avenue’s retail Golden Mile and diverse dining in the Loop and beyond (plus the best live jazz and blues north of the Mason Dixon).
Developed by Magellan in conjunction with Dalian Wanda Group (Wanda’s first American project), Vista Tower also represents the rebirth of Chicago’s property market.
“Ten years ago you couldn’t have sold a project for $1,000 per square foot. That was above the ceiling for Chicago,” begins Sean P Linnane, Magellan’s executive vice-president.
“Now it’s closer to $1,200 as an average.”
Of Vista’s sales so far, he admits many are end-users of some sort, not all investors.
“It’s typical Chicago buyers, people who are moving out of buildings like Trump, suburban buyers purchasing a second home or those with kids who’ve moved out and they’re moving downtown. It’s a true barometer of residential demand.”
In addition, Chicago (and, as a result, Vista) finds itself on the list of potential investment locations for those who hadn’t previously considered the American Midwest.
“We’re undertaking the first project with an international appeal at the same time as Chicago is enjoying a growing reputation as a global city and that does make us a viable option for some investors,” he says.
“A few years ago it was only gateway cities. Now I think we’re on that list.”
And people are moving downtown. In true hyperbolic media fashion, Chicago’s recent crime stats are misleading. Nonetheless, he admits the idea that Chicago is the Wild (Mid) West poses a bit of a public relations problem.
“Yes that perception is a problem. If you look carefully and look behind the numbers there’s little crime downtown.
“The perception, unfortunately, is that it’s widespread and that it’s equally distributed across the city. That’s not true. But because perception can be more important than reality it’s something we need to be able to speak to, and point to the city’s efforts to improve it.”
A Business Hub
Institutional investors have looked behind the numbers and decided Chicago is a good place to set up shop, which is good for residential investment.
Thomas C Kirschbraun, international director for capital markets and international residential services at JLL in Chicago, is quick to point out Chicago’s strong fundamentals, starting with prices for comparable properties 50% of New York’s.
“Being the ‘capital’ of the Midwest you get buyers from other central cities that do a lot of work in Chicago – St Louis, Minneapolis, Detroit,” he explains, noting central Chicago’s prices didn’t suffer like the wider metro area did in 2008.
Supply is low for upscale or large residences, and the massive movement of corporates into the city over the past few years has kept demand high. For investors, “The vast majority of the tenant pool is likely to be people that come to those employers at the executive level, don’t have kids, are in their 20s and 30s and want to walk to work. There’s huge number of these with these relocations coming to the city”.
Corporations such as McDonald’s (moving into Oprah Winfrey’s former West Loop studio by 2018), and recently Boeing, Motorola and United Airlines (to the old Sears Tower) are all looking to tap young talent uninterested in living in the suburbs, which ensures a strong tenant pool. Beyond that, increasing urbanisation as a lifestyle pattern is also a factor.
“Across the United States it’s more of a lifestyle choice. If I looked at Chicago – and the US – 20 years ago, the ownership rates would have been 70%. Today it’s 66%,” Linnane says.
“Every blip is thousands of units of inventory. That’s where the renters are coming from.”
Even though rental prospects in the area are strong – Kirschbraun’s projects unleveraged yield up to 9%.
“For our investor-buyers when it’s delivered in 2019 at roughly $4.50 per square foot – based on other buildings already in the market, we think we’re being very cautious.”
Linnane is looking at the long term.
“For an investor who’s looking to rent out their unit and put an occupant in it, that’s one investment scenario, but that’s not how I’m selling this building … I’m focused on capital appreciation of the unit.”
Though Vista Tower’s 406 residences are front and centre, the three-tiered building, designed by Studio Gang Architects (American Museum of Natural History Gilder Centre), will include a 191-room five-star Wanda Vista Hotel, whose amenities will be accessible to residents.
The crystalline tower boasts three “stems” at varying heights, each with its own shaded truncated pyramid. The exterior blue glass is intended to mimic the wavy moods of Lake Michigan. With units averaging 2,500 square feet and ranging from one-bedrooms to upper floor, ultra-luxury split-level penthouses, Vista Tower has something for every buyer.
Interiors come courtesy of Hirsch Bedner Associates (Four Seasons Guangzhou) and will feature floor-to-ceiling windows, hardwood flooring, high-speed data wiring, tiled balconies, Gaggenau, Kallista and Kohler fixtures and Snaidero cabinetry, and panoramic views, gas fireplaces, wine coolers and air baths in the Sky 360 suites. Residential amenities include a theatre, resident lounges, spa facilities, outdoor terrace, 24-hour security and maintenance, concierge services and valet parking. Prices at Vista Tower range from US$1 million to $17 million (HK$7.8 to $130 million).