They may have paved paradise and put up a parking lot, as Joni Mitchell once sang, but these days the lots themselves are Chicago’s real estate utopia.
Years into a residential construction boom downtown, and amid broader adoption of ride-hailing apps such as Uber and Lyft, real estate developers are gobbling up surface lots they can cover with high-rises.
Building over parking spaces and vacant lots is nothing new, but there’s anecdotal evidence the practice is on the rise as the city’s core expands.
For many downtown workers and visitors, their favorite surface lot could one day vanish.
“I’ve been doing this 30 years, and I’ve bought many a parking lot,” said residential developer Alan Lev, president and CEO of Belgravia Group. “The rate of parking lots disappearing is accelerating.”
Big increases in condominium sale prices and apartment rents have pushed up the value of well-located land, Lev said. At the same time, revenue has decreased as much as 30 percent in some parking lots his firm owns. “Many downtown garages are not doing the kind of business they used to, which is indicative of ride-sharing and not as many people owning cars,” Lev said.
The lowly surface lot will play a role in reshaping Chicago’s skyline, with plans for two of the city’s tallest buildings in the works on parcels now used for parking.
Tribune Tower’s owners, CIM Group and Golub & Co., are contemplating a 1,338-foot-tall hotel and condo tower — which would become the city’s third-tallest building — on a parking lot east of the North Michigan Avenue landmark.
On a large lot across the street from Holy Name Cathedral, JDL Development plans to build two residential towers, including one that would rise 1,011 feet. The 76-story tower would become the city’s sixth-tallest.
Meanwhile, Related Midwest and Tucker Development propose a 51-story, 300-unit condo tower at 170 N. Peoria St. in the fast-changing Fulton Market district. If approved, it would become one of the tallest buildings west of the Kennedy Expressway.
What’s happening in Chicago is part of a national movement that will only intensify, according to Green Street Advisors.
U.S. parking needs will be cut in half during the next three decades, the Newport Beach, Calif.-based real estate research firm projects. Widespread adoption of ride-hailing and self-driving cars will eliminate the need for swaths of parking spaces — enough that the square footage of the unneeded spaces will be more than the cumulative size of every currently existing apartment, office, shopping mall, retail strip center and warehouse property in the U.S., according to the Green Street report.
Dwindling car ownership could have a major impact on land use and urban planning in the coming decades. It’s already affecting the way new towers are designed. Towers built over parking lots often include spaces within the new structure.
The ratio of parking spaces per unit has fallen in many new apartment buildings, particularly near public transportation. But condo owners — even those who don’t have cars — typically want at least one space with an eye toward resale value, Lev said.
Some parking structures within new buildings are being constructed in such a way that the parking floor space becomes obsolete, it can one day be converted to uses such as offices or apartments.
The city’s Department of Planning and Development last conducted a downtown parking survey in 2013, when 91,747 spaces were counted in the area. between Roosevelt Road, Chicago Avenue and Halsted and LaSalle streets. That was an increase from 86,969 spaces in the previous survey in 1998.
A spokesman for the department said no recent estimates are available on the current supply of downtown spaces. Several recent developments have been west of Halsted, and would not be reflected in statistics from the survey area.
There are no formal statistics kept on Chicago parking lot transactions, but developers and commercial real estate brokers say the market for development seems especially active these days. The value of parking lots just east of the expressway downtown, measured by the number of square feet that can be built on a site, has increased 25 percent in the past two years, estimates Mike Nardini, a CBRE first vice president. Owners of lots continue exploring potential sales — especially those who missed out on the last real estate peak a decade ago.
“Everybody’s measuring it up to see, is now the time to sell the high value of these air rights?” Nardini said.
The apparent increase in parking lot sales follows the movement of jobs and residents to downtown in recent years, which has pushed apartment construction to historic levels. A record 4,350 apartments were completed downtown in 2017, according to Integra Realty Resources. After a relative slowdown of 3,000 units this year, another 4,200 units are expected in 2019.
“Keep in mind that Chicago has been the fastest-growing urban center in the United States over the past decade,” said Steve Fifield, founder and CEO of development firm Fifield Cos. “People are coming here for jobs, so all of us entrepreneurs are trying to source deals (for new developments).”
Fifield last year completed the Sinclair, a 35-story, 390-unit apartment building connected to a new Jewel-Osco grocery store, on the parking lot of a former Jewel at 1201 N. LaSalle St. Late this year the firm will complete a 44-story, 492-unit apartment tower on a former parking lot at 727 W. Madison St.
The developer also has a contract to buy a parking lot at 630 S. Wabash Ave., where it plans a 20-story, 153-unit apartment building, Fifield said.
Other Chicago developers are taking on multiple projects to capitalize on downtown expansion too.
CA Residential is close to completing Eleven 40, a 26-story, 320-unit apartment building on a former surface lot at 1140 S. Wabash Ave. in the South Loop.
Parent company CA Ventures is one of the developers of a 20-story, 438,000-square-foot office building under construction across the street from Old St. Patrick’s Church on a lot at 625 W. Adams St. As part of that deal, the Catholic church will have rights to use parking spaces within the office building on Sundays.
“When you have the population of downtown Chicago growing 60 percent from the 1990s to today, that is going to drive demand for new office and multifamily (buildings),” said Bob Flannery, president of CA Residential. “The center of the circle is going to expand outward. As that happens, land becomes more valuable.”
Rather than covering a surface lot, Belgravia found a new twist for Renelle on the River, an 18-story, 50-unit condo building at 405 N. Wabash Ave. that is expected to open in early 2019. Construction is happening atop a below-ground, 300-space parking garage that is alongside an existing condo tower.
In addition to outright sales of parking, surface lots have become a throw-in that boosts the value of a building sale.
“Investors are also trying to find existing buildings with surface lots for future development potential,” said Jon Morgan, a founding principal of Interra Realty. “Our business has exponentially increased as it relates to parking lots or lots adjacent to a building.”
In one such deal, North Park Ventures bought a condo building at 3264-70 N. Clark St., about a half-mile south of Wrigley Field, with plans to convert the 30 units to apartments and add a five-story, 22-unit apartment building on the adjacent parking lot.
Steppenwolf Theatre Company recently struck a deal to sell its Yondorf Hall building at 758 W. North Ave., which includes a parking lot along elevated CTA train tracks. The buyer, a venture of CA Ventures and Springbank Real Estate Group, plans to redevelop the existing office and retail building and construct an eight-story, 92-unit apartment building on the lot.