Development group Golub & Co. has just agreed to pay $6 million for a piece of South Loop property owned by the city of Chicago. The developer plans to build a 35-story apartment tower comprised of 392 apartments in the space the current property occupies.
According to Crain’s Chicago Real Estate Daily, the project will cost the developing company roughy $111 million to complete. If the company is able to build at the planned location, on the southeast corner of Ninth and State, then the apartment tower will be the newest addition to an apartment boom currently taking place in the downtown Chicago area, where occupancy rates have increased along with rental prices.
Many people have been moving downtown due to employment, giving developers cause to begin construction on seven new apartment towers this year. The new surge of apartment developments is expected to bring in just under 3,000 new units for downtown Chicago residents and prospective residents.
During this building boom, the South Loop has been the downtown region’s weakest submarket. The large supply of condos which are located in the South Loop, most of them being rented out by developers and investors, are limiting the occupancy and rental rate gains of the neighborhood.
Originally, the city had been seeking just over $8.5 million in exchange for the property. However, when the first offer came in from Golub, the purchase price was deemed acceptable. In addition to the $6 million, which comes out to roughly $15,300 per unit, Golub has agreed to pay $3.9 million to a city fund which pays for affordable housing. This extra payment releases the developers from a requirement to build affordable housing units into the new project.
Alderman Robert Fioretti has admitted support of the sale to Golub, but has suggested that Golub present building plans to the community before breaking ground on the project.
“We understand that their plans are very preliminary and that they have a significant amount of work ahead of them to make this project fit the South Loop neighborhood,” Fioretti says.
Golub is expecting to charge rent on the units based on a recent CDC report that estimated 2011 rents for the area at $2.70 per square foot. The CDC has also estimated that the rates will increase 3 percent annually after this year. Currently, the most expensive rental units in the South Loop, located at 1935 S Wabash, cost $2.55 per square foot.