Downtown Chicago's condo development boom has ended. Here's why

For the first time in years, there are no new large condo projects under construction in downtown Chicago.

Roughly 2,500 condos have been developed downtown since 2015 as multiple towers were constructed, and about 600 of those units are still available, said Gail Lissner, managing director for Integra Realty Resources.

But the high cost of construction and high interest rates, which are discouraging luxury home sales, have brought large-scale condo construction to an end, Lissner said.

About 31,000 rental units since 2015 have been built downtown, including the Gold Coast, River North, South Loop and the West Loop neighborhoods, and developers have plans to build more new apartment towers. But there are currently no condos under construction downtown, and no plans for new projects.

“It’s not as much fun to talk about the condo market as it was 20 years ago,” Lissner said. “If you want new construction, there are very few choices.”

Builders have created a few small, boutique condo developments downtown in the past few years that are selling well, she added. But it will be years before downtown will see massive towers such as the recently completed Cirrus in Lakeshore East, The Reed at Southbank in the South Loop and The Residences at The St. Regis Chicago at 363 E. Wacker Drive.

“There won’t be any for the foreseeable future,” said Jonathon Cordell, development director, Central Region, for Lendlease Development, which developed both the Cirrus, a 47-story building that opened in 2022, and The Reed at Southbank, a 41-story tower with both rentals and for-sale homes, which opened last year. “Once a unit is gone, it’s gone.”

Apartment developers can better handle high construction costs because downtown renters, many needing quick housing after starting new jobs, fill up new rental units much faster than buyers, who typically need to make far bigger commitments, especially with interest rates so high.

“It can be daunting for a first-time homebuyer to get a mortgage for the first time,” Cordell said.

Lendlease is solving that problem by offering mortgage rate buydowns, he added, helping buyers secure loans that will temporarily have interest rates several percentage points below market rate. The company also allows qualified buyers to rent their units for up to a year before closing the sale.

“That bridges the gap for buyers,” Cordell said.

Most of the condos built in recent years are large, ultra-luxury homes, with multimillion-dollar price tags and more than 2,000 square feet, Lissner said. Those can be tough sells, especially since according to brokers the downtown is now attracting fewer upper-income empty nesters from the suburbs, who often seek homes easier to maintain.

Cordell said Lendlease adopted a different strategy with Cirrus and The Reed. Both offer smaller units, some only 630 square feet and costing about $400,000. They also offer a host of amenities, including indoor and outdoor pools, dog runs, chefs’ kitchens, soundproof music jamming rooms and playrooms.

“We built them in a such a way that they’re more affordable than most properties that the downtown condo market offers,” he said.

The strategy makes sense, said Lissner, partly because vintage condos, those built before the Great Recession, don’t include similar amenities, and because average downtown condo prices have been relatively flat, rising from $543,000 in 2019 to $547,000 in 2023.

“One of the things that motivates people to buy is when they see prices increase,” she said. “So, it’s become more of a lifestyle choice rather than an investment decision.”