Fifteen years after launching its Lakeshore East development on the site of a former nine-hole golf course, Magellan Development Group is in the early stages of building the real estate equivalent of a hole-in-one.
The 94-story Vista Tower condominium and hotel building, which will be the city's third-tallest when completed in 2020, is a $1 billion model for what can go right when developers dream big. The Jeanne Gang-designed skyscraper — like the $4 billion-plus Lakeshore East project surrounding it — is also an example of the type of complex mixed-use developments that have proved hardest to pull off in Chicago in previous construction cycles.
But not anymore.
In Chicago, at least 10 developments that will cost $1 billion or more are already under construction or are backed by high-powered developers that are in advanced planning stages.
By comparison, Sears Tower and the John Hancock Center cost less than a combined $300 million to build. Today's much higher prices reflect factors such as a sharp increase in construction costs in recent years, inflation and appreciation of property values.
Developers are emboldened by a convergence of trends, including a surge in headquarters relocations to downtown Chicago, low interest rates, years of increased real estate values, changing preferences of office and residential tenants, new zoning policies and a willingness by big funds and wealthy foreign investors to plow large chunks of cash into single, high-impact projects.
Among this era's largest projects are multibillion-dollar ones such as Related Midwest's $5 billion-plus vision for a 62-acre site along the Chicago River in the South Loop and Sterling Bay's yet-to-be-unveiled blueprints for more than 40 acres on and around the North Side site where the A. Finkl & Sons steel plant once stood along the river.
At least six other projects of $500 million or more are underway or near the starting line, including the Chicago Cubs owners' redevelopment of Wrigley Field and surrounding properties, a conversion of the long-vacant old main post office into modern offices and retail, and Blackstone Group's planned retail and entertainment addition onto the base of the city's tallest building, Willis Tower.
"There are a lot of really big developments, and the growth of the city center is what it's all about," said John O'Donnell, founder of Riverside Investment & Development.
His firm is leading a planned $1 billion-plus Union Station redevelopment and also has signed Bank of America to anchor a 51-story office tower to be built on Wacker Drive.
There's no guarantee all, or even most, of the estimated $20 billion of Chicago developments will happen. The biggest developments have the most money at stake, and take the most years to complete, making them vulnerable to unforeseen circumstances such as a recession.
"The bigger the project, the lower the probability" of a project being completed, said Greg Van Schaack, senior managing director at Hines Interests. A venture including Hines and the Kennedy family plans to start construction soon on the second of three planned Wolf Point towers on the river near the Merchandise Mart.
Regardless of how they all fare, the sheer number of proposed megaprojects stands out, making this a unique time in Chicago.
From 1990 through 2013, six construction projects of at least $500 million began in Chicago, according to Dodge Data & Analytics. From 2014 to now, there already have been four, even before several of this cycle's largest plans reach the starting line.
Nationally, there were 120 construction projects of that size from 1990 to 2013. Since 2014, the U.S. total is 77. Ongoing projects include the $20 billion-plus Hudson Yards in New York, billed as the most expensive private real estate development in U.S. history.
Total construction volume last year reached its highest level in Chicago since 2008 and its highest point nationally since 2006, according to Dodge.
Dodge tracks the total cost of each construction phase as it begins, meaning some multiphase developments that top $500 million are not reflected in its figures. But this wave of supersized developments appears to be the most ambitious in decades, locally and nationally.
"There's a tremendous amount of mixed-use development in Asia, and now it's coming more to the United States," said Grant Uhlir, principal and managing director of the Chicago office of architecture firm Gensler.
"I think the timing is just right in Chicago," Uhlir added. "Funding is available, there's city and community support, there's pent-up demand and there are interested developers. It's all aligning."
Chicago experienced a skyline-changing period in the 1960s and early '70s, when three of city's four tallest buildings were built: Sears Tower (now Willis Tower), the Standard Oil Building (now Aon Center) and the John Hancock Center. The Marina City towers, early phases of the Illinois Center mixed-use complex, sprawling residential complexes such as Sandburg Village on the North Side and other major projects also were built in the city during that time.
If successful, the current roster of developments could rival that era, and would be remembered as one of the busiest times ever in Chicago. With it would come construction jobs, increased property tax revenue and perhaps a new generation of architectural gems.
If this development cycle ends badly, Chicago could be saddled with partially leased, or even partially built, white elephants, giving the city a black eye and serving as a cautionary tale.
Chicago's real estate history is littered with examples of ambitious projects that never got off the ground or stalled early on, such as the planned 150-story Chicago Spire, and others that took far longer than expected to completed, such as the Block 37 mall, office and apartment complex in the Loop.
So even the largest developers wade cautiously into multibuilding projects.
"When you close on a 28-acre site, you give yourself a high-five and then you say, 'Holy (cow), what have I done?'" said David Carlins, Magellan's president. "It's a big gamble."
During his 46 years in Chicago real estate, CBRE Chairman Bob Wislow has seen development trends ebb and flow. But what he's seen over the past half-decade, when more than 60 companies have moved their headquarters to Chicago from the suburbs or outside the area — including large employers like Kraft Heinz, Motorola Mobility, Conagra Brands and Motorola Solutions, as well as McDonald's upcoming move — feels like a sea change.
"You've seen this major migration of companies moving from the suburbs to downtown, and many of those (workers) aren't moving back to the suburbs, even when they have kids," Wislow said. "It's been truly amazing what we've seen happen."
Many of the things those companies are moving to get closer to, including younger employees, public transportation and amenities, are driving new mixed-use developments.
"What is being built is being built around some underlying trends toward urbanization," said Nadeem Meghji, head of real estate for the Americas at Blackstone, which owns Willis Tower and River North Point (formerly the Apparel Center). "There's more of a live-work-play element to it.
"What we're seeing in Chicago, as well as some other markets including Boston, San Francisco and Seattle, is an ability to attract an outsize share of talent, jobs and overall business activity. Companies are voting with their feet and moving to downtown Chicago. That is a secular change, and one that we're seeing not just in the great U.S. cities, but globally."
These days, more city employees or residents are demanding access to creature comforts like adjacent shops, bars, restaurants, bike storage, outdoor space and grocery shopping. A single office or residential tower may not be able to meet those needs.
"With larger projects, you are able to take a deeper dive in developing amenities, including more elaborate spa and fitness programs, retail offerings, and parks and open space that you may not have been able to do in one-off developments," said Jason Buchberg, a Chicago-based vice president at Crescent Heights. The Miami-based developer is building the 76-story One Grant Park. That tower is the first of a potential three-phase residential development along the south end of Grant Park.
Multibuilding developments require more land, though. Partly by coincidence and partly by design, several large parcels have become available at the same time, years into a development boom.
That includes some acreage that had never been available for sale, such as the Finkl site and a parking lot across the street from Holy Name Cathedral. Finkl is one of several properties in a longtime industrial corridor along the river where the city is in the process of changing zoning to allow uses such as apartments, hotels and shops.
Other sites where development had been stalled for years by finances or other woes now have new owners with strong track records. Related has grabbed control of two such properties: the sprawling South Loop site and the former Spire site.
"The old saw about Chicago was, there's always another piece of real estate — i.e., the land was less valuable because there's more of it," Related Midwest President Curt Bailey said. "If you take a hard look at what's happened in Chicago the last seven years, that's no longer true. When there aren't that many developable sites left, you go find where they are, and those may be complicated sites that have been fallow for various reasons."
While they're too costly for most developers, big and well-located land parcels offer some advantages. For one, companies often get a better deal buying in bulk, and they're able to go through one zoning process to get their project approved, rather than a series of zoning negotiations.
"The same effort it takes to find and (secure approval for) an entire 28 acres isn't that much more than it takes to do a bunch of one-off projects," Carlins said. "Now you can put all your efforts into building new buildings."
As land values increase over time, developers start new towers with profits already in their pocket. Since buying its Lakeshore East land, Magellan has brought in several development partners, including investors from South Korea, Qatar and China, as it continues adding towers.
Since Lakeshore East's beginnings, big international investments have become more commonplace in Chicago. Amid low interest rates and broader investor enthusiasm for real estate, pension funds and other institutions are willing to put more money into a single project, said Jim Letchinger, president of JDL Development.
Big foreign and domestic investors have already expressed interest in JDL's plan to build two towers with a combined 800 to 950 luxury apartments and condos across from Holy Name, Letchinger said. Pending city approval, the project also would include a base of about 160,000 square feet of retail, including a large grocery store, fitness club and spa, Letchinger said.
"There's big capital looking to be deployed, and (investors) want high-quality and high-profile projects," he said. "It's really a fundamental shift into picking a project they love, instead of picking five smaller projects."