Developer Sterling Bay would prefer that we ponder Lincoln Yards’ future rather than dwell on its present. Hence the tall screens atop the fences lining Cortland Street, which bisects the 55-acre North Side megadevelopment-to-be. The barriers obscure blighted lots and fill the imagination of passersby with illustrated vignettes of what life here could be in the year 2030, the project’s anticipated completion date. Skate parks, food trucks, boardwalks, oh my!
If only. Scenes of carefree (and mask-free) Chicagoans happily strolling through the $6 billion project — a mix of residential, retail, office, and entertainment space nestled in the industrial no man’s land between Lincoln Park, Wicker Park, and Bucktown — certainly look great. But in a year overshadowed by pandemic and protest, the idea that the city will successfully invent two neighborhoods over the next decade — Lincoln Yards and the 78, a mixed-use development between Chinatown and the South Loop — suddenly sounds like the stuff of science fiction.
The pandemic and recession have thrown a massive wrench into construction and tenant-securing timelines across the city, putting some plans in danger. “Offices, retail, and hospitality are the areas most affected, and you’re seeing concern from the lending side, even if short term,” says Jon Morgan, cofounder and managing principal of Interra Realty, a Chicago-based commercial real estate brokerage firm. For instance, 1000M, the towering 74-story condo that broke ground in October 2019 in the South Loop and had a foundation by spring, has been put on ice because investor Goldman Sachs got cold feet.
As of August, Related Companies, the developer whose Midwest arm is behind the 78, was collecting only 50 percent of its retail rents at Hudson Yards, the megadevelopment it opened in Manhattan last year. It lost its anchor store, Neiman Marcus, when the department store filed for bankruptcy. Related decided to fill that vacancy with offices rather than attempt to court another retailer. Nationwide, commercial real estate deals are down 70 to 80 percent from the first quarter of 2020 to the second, according to Gay Cororaton, senior economist at the National Association of Realtors.
Lots of questions remain for megadevelopers: Will people still pay a premium to live in the thick of a city? What happens to office space if working from home becomes the new norm? And is this the deathblow for brick-and-mortar stores?
Sterling Bay and Related Midwest are concerned but say time is on their side. “Listen, if you’re not worried about the current state of the economy, you’re not paying attention,” says Andy Gloor, Sterling Bay’s CEO. “This is going to leave some structural changes that are here to stay. But is it a permanent fog over our business? I don’t think so.”
Some fog is actually useful to the developers. The ordinance that the city approved in April 2019 — the one granting roughly $1.6 billion in tax increment financing to fund the projects — is vague about what will happen after the completion of the first of several phases. That gives the developers wiggle room. Sterling Bay has already made a major pivot. In August, it unveiled plans for a 320,000-square-foot life sciences research hub at the southern end of Lincoln Yards. Construction could start in early 2021.
The announcement comes on the heels of a trio of new biotech company leases signed at 2430 North Halsted — a nearby Sterling Bay redevelopment project on the site of an old Children’s Memorial Hospital facility. The Skokie biotech company Exicure signed on as the first future tenant and plans to occupy about 25 percent of the space. The developer suddenly sees Lincoln Yards as a significant part of a “medical innovation district.” “When you start a development, you don’t know exactly who is going to show up or what demand is,” Gloor says. “But as a result of COVID, you’ve seen expansion and acceleration of desire for this kind of lab space, and we now look at life sciences as one of the main drivers for Lincoln Yards.”
Similarly, Related Midwest’s $7 billion plan to turn a long-vacant former rail yard into what it calls Chicago’s 78th neighborhood is forging ahead with the closest thing to a sure bet: the University of Illinois–led Discovery Partners Institute, which is slated to break ground in the next year and will house research in agriculture, environment, health, and transportation. It was a pet project that then-governor Bruce Rauner got off the ground in 2017, but his successor, J.B. Pritzker, produced $500 million in state capital funds for it this year.
What comes after these opening salvos is a bit hazier. If it follows the rest of its original plan, Lincoln Yards will deliver up to half a square mile of new commercial and residential construction, plus 21 acres of parks. But that’s the view 10 years out.
For the time being, dealmaking is slow for Lincoln Yards. “Everyone is hoping the world stabilizes before they make 10-to-15-year commitments,” says Gloor. Likewise, the 78 hasn’t yet landed an anchor to take on one million square feet of offices. “When everyone’s remote and lockdowns are happening, it gets a little harder to move forward on a deal,” says Related Midwest president Curt Bailey. “It’s a major thing we’ve had to deal with with people who we were talking to.”
Both CEOs are banking on the office making a comeback. “To build a successful company and culture, Zoom meetings are not a long-term solution,” says Gloor. “Things will normalize and the demand for offices will still be there.” They share a sense of optimism for the return of brick-and-mortar retail — albeit with a turn toward storefronts that serve as hubs for delivery in lieu of in-person shopping.
Perhaps that’s wishful thinking — or just canny PR — but some observers argue that megadevelopments may be better off than other parts of Chicago if trends continue. Why commute or take an elevator up the hermetically sealed skyscrapers of the Loop if the 78 and Lincoln Yards offer more breathing room?
“People now want open air, more parks, and less density,” says Morgan. “So I think you’ll see people and companies relocating from the Loop.” Then again, if a COVID vaccine is elusive and the economy tanks, Lincoln Yards could become the 21st-century version of a ghost town. If it does, that blue “Y” logo that Sterling Bay flies over Cortland Street as a sign of things to come will instead look like a flag of surrender.