Conventional wisdom would have you believe that transit proximity and a roaring convention scene have fueled any redevelopment of historic Motor Row to this point. McCormick Place is expanding—again—and much noise was made about the opening of a Cermak-McCormick Green Line station last winter after years of planning and construction. But other factors are at play in persuading people to look into condos south of Cermak Avenue—simple, potent ones.
A few years ago, the two condo conversions accounting for the majority of properties in the district—2303 and 2332 South Michigan Avenue—offered selling points not so easily had a mile or two north: generous square footage for the price, an eight-year landmark district property tax freeze, and garage parking one block from the Stevenson Expressway. “Everybody drives in this building,” says Bronzeville Properties broker Tennille Winfrey of 2332 S. Michigan. “I’m not sure they care about train lines.”
The first wave of buyers here and across the street at 2303 South Michigan arrived several years ago with great anticipation for what the district could become. The strip was very nearly branded an “entertainment district” on more than one occasion, and a Cheap Trick-helmed music and dining venue with a museum was supposed to anchor an outgrowth of clubs and restaurants. But with the recession and fewer businesses opening up, many condos couldn't maintain their value.
There is some encouraging new commercial activity including the 2014 opening of Motor Row Brewing. The venture is gradually spreading to all three floors of its landmark building, and South Side brewery tours and a taproom have brought a little more pedestrian life to the avenue.
“A lot of condo owners still expect big things are just around the bend and so are reluctant to sell,” Winfrey says. Some of those same people paid more for their condo than they’d likely get today. They are underwater on their mortgages and don’t want to sell short.
This, along with a relatively small number of Motor Row residences and those non-transferable tax freezes (after a year, the second owner may find her annual taxes vaulting from a few hundred to a few thousand), helps explain why so few condos have sold in the past three years. Five, in fact. That’s it. So it’s surprising that four are presently listed for sale. Three of these are handsome timber lofts at 2303 South Michigan (it has 52 units to 2332 S. Michigan's 22), including this 1,755-square-foot unit. The fourth is a 2,200-square-foot two-bedroom triplex at 2332 with four outdoor spaces for $575,000.
“There are a good number of units rented out in the building,” says @properties agent Leigh Marcus, who is handling the 1,755-square-foot unit. The owners may have been biding their time while their property slowly regains value. The unit is listed at $499,500—$145,000 more than the owner spent in 2010. A similar unit with a bit more outdoor space sold quickly in August 2013 for $477,500, which bodes well. 2010, of course, was a low point for real estate. Those who bought just a couple years earlier, right when Motor Row’s conversions were opening, have a steeper hill to climb.
That brings me back to the rental option. In many parts of town, South Loop included, rents are spiking as home values inch upward. A large two-bedroom unit in 2332 had until recently rented for $3,000 a month. The 1,755-square-foot three-bed, meanwhile, had a $2,650 monthly rent. A few doors down from both condo buildings, The Shelby, a newer rental building, has 650-square-foot one-beds priced at $1,625 a month, and a 1,270-square foot two-bed for $2,850.
These are hefty sums in the part of the South Loop with the least street life. You won’t catch homeowners complaining. Two consecutive years of renting out your condo earns you the ability to claim rental income as a landlord when applying for a new mortgage on a second home—in other words, it makes owning two homes practical so long as one shores up your bottom line.
Count Winfrey’s seller among those not chomping at the bit to leave. She turned down two offers in the first three months of listing, one all cash and the other with questionable financials. “She loves the space and the building and is no hurry to sell,” says Winfrey. An opportunity arose to work with the building’s developer to come up with a new custom home. For most owners in Motor Row, there are more reasons to stay than go—but you can expect a few more listings in the future as the market here slowly improves.