Pedestrians tired of detours and dodging between Loop construction sites and property owners eager to find tenants for their vacant high-rises are happy the building boom of the 1980s has ended.
But developers whose new multimillion-dollar projects are not likely to get off the drawing board in these more austere times find little to cheer about in the ’90s.
Those are the conclusions that commercial real estate developer John G. Iberle draws from the current market. Iberle is senior vice president and principal of The John Buck Co., a Chicago-based developer of commercial buildings.
“Between 1980 and 1992 there were 55 new highrises built in the Loop. But the Chicago Title and Trust Tower completed in 1992 will be the last significant new commercial building that will be built in the Loop in this decade,” Iberle said.
“We sowed the seeds of our own destruction,” Iberle said, referring to the practices of many entreprenurial developers who overextended themselves financially during the 1980s.
“When the financing dried up, their projects collapsed like a house of cards. As a result, today’s more conservative developer is driven by fear and will build to suit, but not to speculate.”
Iberle made the comments last week as one of the 1993 Mazzuchelli Lectures at Rosary College in River Forest. The theme of this years series is “Castles in the Air: A Look at Chicago Architecture.”
Today, the Loop has an office vacancy rate of more than 20 percent-or six percent above the national vacancy rate of 18.6 percent.
As a result of this glut of available space, many of these build-to-suit projects that will keep the cement mixers churning in the Loop during the ’90s will focus on construction related to the public sector, cultural and educational facilities and renovations of existing high-rises, according to Iberle.
These include the city’s new 911 emergency facility on Madison Street and the renovation of Navy Pier as an arts center, the renovation of Orchestra Hall for the Chicago Symphony Orchestra, and a comparable project for the Civic Opera House, home to Lyric Opera.
New buildings also are planned or already under construction for the Museum of Contemporary Art, Northwestern Hospital and new business schools for Loyola University and the University of Chicago.
There also will continue to be a demand for multi-family residential mixed-use buildings, such as the Plaza Escado at Wabash and Hubbard Streets and the 900 N. Michigan Ave. building with its mix of retail and residential.
Other projects that will provide jobs for the construction industry during the ’90s include major renovations of existing high-rises, such as the 20-year-old Sears Tower ,as well as other buildings constructed during the ’50s that need upgrading to meet the telecommunication and computer needs of tenants.
“The life cycle of many of these buildings can be extended for many years if they are can be made competitive with newer buildings,” said Iberle.
Iberle suggested another reason for the current glut of Loop office buildings is the length of time that elapses from conception to ribbon cutting.
“A developer’s crystal ball gets a little cloudy when he tries to anticipate events two and three years down the road,” he said. “As a result, many developers who obtained financing at a time when demand for office space was high and overextended themselves were left with the short end of the stick when the economy took a nosedive.”
He cites his experiences as project manager of the Leo Burnett building at 35 W. Wacker Dr., which was completed in 1989 as an example of this lengthy process.
“It took five years, beginning in 1984 when Leo Burnett first began scouting sites, to 1989, when the ad agency and their major tenant, the law firm of Winston and Strawn, occupied the building,” he said.
Finally, in response to a question on who is to blame for the “holes” or unsightly vacant lots that mar the loop’s skyline, Iberle blamed the tax structure.
“In the past owners were willing to maintain an older `tear-down’ building situated on a valuable parcel of land while waiting for Mr. Right to come along and buy it,” he said.
“But there is such a discrepancy in the tax code between vacant land and land with a building on the site that owners who can’t-or are unwilling-to pay the taxes on the lot-plus-building simply take the building down and pay substantially lower taxes on the land while waiting for the right buyer,” he said.
