Lap of Luxury A $1 million home is fine, but if you want something really nice... by Barry Pearce
A million dollars is still a weighty sum in the local market, but it’s no longer an unfathomable amount for a surprisingly large number of home buyers. The top unit at the Park Tower, a luxury highrise at 800 N. Michigan, is around $3.4 million for raw, unfinished space. At the new Fordham, under construction at 25 E. Superior, a duplex on the 46th and 47th floors will cost you almost $4.3 million, but you’d better round up that number if you’re interested. The sticker price there also is for raw space, and it takes more than spare change to deck out a 5,500-square-foot duplex. A growing group of high-end towers, including the Bristol, the Park Tower, River Bend and River View, have price ranges that rarely dip below $400,000 and can run into several millions of dollars. John Jaeger, of Appraisal Research Counselors, Ltd. says several more projects of the same scale are on the drawing boards. “We’re looking at an extremely busy year construction-wise,” says Jaeger, vice president of residential projects. “There’s been a tremendous amount of projects beginning downtown, and a lot that were announced in ’99 are building now. We’re also going to see more buildings like the Park Tower, with units selling at $350 to $500 a square foot.” Earlier in the decade, the city saw a spate of relatively affordable condo conversions, but virtually no new construction of luxury highrises. Now, more than half a dozen planned towers are offering ultra-luxury product, though many also have more “affordable” units – if you’re comfortable using that word for apartments costing $300,000 to $600,000. For those of us with narrower vocabularies, the question becomes, where is all the money coming from? The answers are not simple, but one of the biggest and most obvious is the national economy. An unprecedented span of economic growth and a runaway stock market have put a lot of cash in the pockets of a lot of home buyers. Many of these same buyers have built up significant equity in their current homes and have good leverage to trade up to luxury highrises in a hot real estate market. Demographics also favor the new buildings. As well-off baby boomers become empty nesters, developers say, many are looking to simplify their lives and return to the excitement of living in downtown Chicago. Some are trading suburban single-families for low-maintenance condos, while a smaller number are keeping their larger homes and buying in-town residences for weekends and late nights at the office. “In the U.S., someone is turning 50 something like every eight seconds,” says Herb Emmerman, of Equity Marketing Services, which is marketing the Fordham, among other new developments. “That translates into a very large and growing market for people who are building this kind of product.” Developers say that empty nesters have been a significant part of the luxury market. Most are buying condos as their primary residences, but suburbanites and out-of-towners purchasing pied-a-terre units also have been a strong segment, accounting for up to 20 percent of sales in some developments. Because of high costs for land and labor, builders of the new highrises are selling units at a minimum of $300 a square foot. But as luxury features are added and larger spaces are designed, many units are passing $400 and even $500 a foot. To justify those costs and entice buyers who now have a number of buildings from which to choose, developers are offering an unprecedented level of services and amenities. The Park Tower, developed by LR Development, is one of the best examples. The 67-story pencil-thin highrise will have a 19-story Park Hyatt Hotel as its base. Condo buyers will be able to enjoy a range of hotel services, from room service and housekeeping to an indoor swimming pool and spa. The building also will house a gourmet French restaurant.
“It’s a unique product, just off Michigan Avenue and the Gold Coast, and Mr. Carley developed a different concept, offering extraordinary services comparable to what you would find in a five-star hotel,” Emmerman says. “In today’s world, you can always buy real estate, it’s hard to buy service.” The Bristol, 57 E. Delaware, came on the market before the Park Tower and the Fordham, and is nearly sold out. The building offers a 24-hour doorman, concierge, valet and receiving room, fiber optic cables, a 20-yard swimming pool, a garden sun deck, whirlpool and fitness center. The top units, with about 3,300 to 3,500 square feet, are priced in the $1.5 million range. Although the new luxury towers are pricey, many buyers think they offer better value than the lofts and conversions that may have lower prices in absolute terms. “I looked at some conversions, existing condos and new construction,” says Paul Gauer. “What attracted me to the new buildings most was that I’m guaranteed brand new state-of-the-art amenities and features. I looked at many lofts too, and the prices that they’re currently going for, $200 to $210 a square foot...At $300 a foot, River Bend was a better value because you’re getting everything brand new.” River Bend is a 38-story luxury highrise planned by Bejco Development for 323 N. Canal, on the Chicago River. Prices in the tower begin in the $300s and range upwards of $1 million. As well as standards such as a doorman and valet parking, the building’s fourth floor will be devoted to an executive business center, with conference room and meeting facilities. The floor also will contain a private European spa and health club with indoor whirlpool, steam room, sauna, massage room, showers and complete exercise facilities. A number of buyers at the project have been purchasing more than one unit to combine, and Bejco Development has responded by offering standard combinations in its brochures. Unit F, for example, is a combination of the A and D units, to create a southeast corner condo with three bedrooms, 2.5 baths and nearly 3,700 square feet of space. Six of these combination units have sold so far, at prices of around $1.3 million. MCL Development is building not just a luxury highrise, but a luxury neighborhood in “River East,” where the Chicago River opens into the lake. Condos in MCL’s River View highrise there are priced from the $390s, while the townhouse units start at $1.35 million. The building includes a level of services similar to its competitors. The Residences at River East Center, an adjacent MCL highrise, will have a larger commercial component, including more shops and restaurants and a 21-screen AMC theater. The amount of high-end product on the market and the number of projects in the pipeline beg the question of whether developers may be overly optimistic. Interest rates have been ticking up recently amid signs that the housing sector is slowing down. Luxury housing is always the most sensitive to economic change because for buyers at this price point, such purchases amount to discretionary spending. But sales don’t seem to be slowing so far. The Bristol is nearly sold out, and after six months on the market, the Fordham is around 75 percent sold, according to Emmerman. David Hall, of Coldwell Banker, sees the growth of luxury housing as part of the city’s resurgence and maturation. “What was a few years ago an exceptional sale, is no longer exceptional,” Hall says. “It’s a snapshot of the economic times we live in, but also of the continuing evolution of the downtown housing market. We are developing a third and fourth generation of housing, where we’ve been heavily a first and second generation housing market in the past, the theory being that people then move to suburbs.” Hall argues that the unusually long economic expansion we are experiencing now has “changed the rules,” creating wealth in a different way than we are used to. He also says that as a result of 30 years of rebuilding, the city is generally a much more attractive housing market. Chicago has never been considered a “million-dollar market.” That was always the kind of extravagant housing designed for the coasts, which perhaps not coincidentally experienced vicious boom-bust cycles while the stolid Midwest was steady. But Hall questions whether the market for high-end homes here isn’t deeper than it’s traditionally given credit for. “We have a much narrower slice of housing in that range (than the coasts), but I’m not sure we have a comparably narrower slice of buying public who live that lifestyle and can afford it,” Hall says. “Maybe the reason we haven’t had the buyers is that the product wasn’t available.”
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million bucks used to be a lot of money in Chicago real estate. There was
a time, not so long ago, when it guaranteed you a penthouse in the best
buildings downtown, or a palatial new single-family in Lincoln Park or the
Gold Coast. These days, you’re lucky to get your foot in the door with a
mil on some Lincoln Park streets, and the top units in the top highrises
are double and triple that amount.
Developer
Christopher Carley took a similar approach with the Fordham. In addition
to standard amenities such as a concierge and 24-hour doorman, the
building will have special storage space with the proper temperature and
humidity controls for fine wine and cigars. More than 13,000 square feet
of ground floor retail space will add to the long list of amenities. Plans
call for a health club and spa, a private theater, a business center with
conference facilities, a travel agency, maid and room service and valet
parking.