Chicago's Lasalle business corridor is lined with aging office high-rises plagued by high vacancy rates. The city is launching a new program to spend tax-increment-financing money to improve it by converting those offices to condos and apartments.  

Describing the level of vacancies as “pervasive,” the city plans to begin offering developers TIF dollars and other incentives to repurpose the historic buildings along the street. 

The goal of the LaSalle Street Reimagined Plan is to create more than 1,000 new residential units, with 300 designated as affordable, according to the city. 

“Diversifying this corridor is an essential component in our strategy to restore LaSalle’s vitality, create more neighborhood-serving retail, and foster a more inviting pedestrian environment in the heart of the Loop that will benefit all Chicagoans,” said Mayor Lori Lightfoot in a statement. 

The properties that are in the TIF district that qualifies for help to cover conversion costs are located on or adjacent to LaSalle Street from Wacker Drive south to Jackson Blvd. Chicago mayors going back to Richard M. Daley have liberally used TIF districts to spur development in neighborhoods that critics have long said are not blighted or economically disadvantaged, which is what Chicago's TIF program was originally designed to help.

As of the end of 2021, the LaSalle/Central TIF District contained about $197 million. It was formed in 2006 and is scheduled to expire in 2030. In a TIF, the assessed value of property is frozen and, as the property value increases, the city uses the funds for improvements in the area. Increased revenue from sales taxes also go to the TIF fund. 

LaSalle Street is dominated by buildings with Classical and Art Deco architecture, many of which are official landmarks or have contributing elements toward the street's listing on the National Register of Historic Places, a designation which makes them more challenging to update into modern workplaces. The city reports that 59% of the LaSalle Street buildings pre-date 1940, 85% of the real estate is for office use, and there is currently no affordable housing on the street. 

In addition to TIF funds, other public resources identified as potentially helpful to fulfill the plan include federal tax credits, Cook County property tax incentives, and Low Income Housing Tax Credits. 

City officials say LaSalle Street’s aging commercial buildings, shifting market demands, and work-from-home trends are contributing to the highest commercial and retail vacancy rates in the downtown, estimated at 26% for office and at 35% for retail. 

“As one of Chicago’s most architecturally compelling and transit-served corridors, there should be more mixed uses and far more economic activity both inside and outside of corridor properties,” said Maurice Cox, planning and development department commissioner, in a statement. 

While LaSalle Street has long been a hub of commercial economic activity including financial institutions, brokerage companies, legal firms, and other entities. new office investment has recently shifted to the West Loop, leaving millions of sq ft of underutilized office space along the corridor, according to Mayor Lightfoot's office. 

The plan also calls for the reactivation of building lobbies and other spaces for cultural or entertainment purposes and storefront improvements such as grocery stores and restaurants. 

Peter Strazzabosco, deputy commissioner for the Chicago dept. of planning and development, said Google’s recent $105 million deal to purchase the James R. Thompson Center for its headquarters may also contribute to revitalizing nearby LaSalle Street.  

“The Thompson Center being planned as Google headquarters is going to bring more people to the street,” Strazzabosco said. “The LaSalle Street Reimagined plan will leverage that corporate presence.”

As part of the sale, the state of Illinois, which owned the Thompson Center, will receive $30 million in cash and another property at 115 S. LaSalle Street, which  is the former headquarters for BMO Harris Bank. and will house 1,800 state employees who now work at the Thompson Center and at other leased offices.  

One of the current occupants of 115 S. La Salle is the Building Owners and Managers Association of Chicago. 

Farzin Parang, executive director of BOMA, agreed that downtown office buildings are being hampered by a slow return to the office, record-high tenant vacancy due to the COVID-19 pandemic and rising property taxes. 

“The city’s LaSalle Street Reimagined initiative, focusing on residential building conversions and the streetscape, is a step in the right direction and one of many strategies we should pursue,” Parang said in an email.

BOMA is a trade association that  represents the office building industry.

Other strategies Parang said should be considered include property tax reform to reduce the tax burden on commercial property and businesses, finding innovative ways to entice retailers to lease space and incorporating art exhibits and cultural events to increase pedestrian activity. 

BOMA plans to seek other office space in the central Loop when the state takes over 115 S. LaSalle.  

Bonnie McDonald, president and CEO of Landmarks Illinois, a non-profit that supports historic preservation, said the plan has the potential to revitalize a commercial street that she described as a jewel of the city facing hard times.  

“Adaptive reuse of places is a positive,” she said. “This will make the street more bustling. The street shuts down now when offices close at 5 p.m.” 

Proposals are due by Dec. 23. They will be evaluated by the city based on economic viability, development team diversity and experience, design, public benefits and other factors.