Copyright Chicago Tribune
Fulton Market district — by most accounts the most economically vibrant neighborhood in Chicago and until very recently the hottest real estate market in town — has in the past two years stalled out in terms of growth. By our count, just two fully approved and pending major real estate projects in that West Loop neighborhood have obtained financing and are under construction. One is a 31-story apartment tower being built at 370 N. Morgan St. by New York-based Vista Property Group. It’s slated for delivery in 2027. The other is a 29-story apartment building at 220 N. Ada St. being developed by Shapack Partners and CRG, which is likely to be the only major Fulton Market project delivered in all of 2026. During the Rahm Emanuel administration, Fulton Market district was going gangbusters. The change is not for lack of developer interest. There are at least 21 major real estate projects in Fulton Market district — offices, apartments, hotels — that the city has green-lighted since 2021, according to information provided by the Department of Planning and Development. But these projects haven’t yet been able to obtain financing and proceed to construction. Twenty-one. Some of these got their city approvals more than four years ago. There was news last month that Trader Joe’s has signed a lease to occupy ground-floor space in a new apartment tower approved at 170 N. May St. Good news for a neighborhood filled with young professionals. Except that the 25-story apartment building has yet to get financing despite winning City Council approval more than a year ago. Will the Trader Joe’s lease entice reluctant would-be backers? Chicago can hope. The overarching reality today is that developers in Chicago’s hottest neighborhood are struggling mightily to convince deep-pocketed investors to pump enough equity into their projects to bag construction loans. All while building booms are underway in cities such as Nashville, Denver and Austin, Texas. We’ve discussed Chicago’s economic torpidity before, but today we wish to highlight the truly worrying situation in Fulton Market. There’s no question about whether more people want to live in Fulton Market or whether there’s need for more hotel rooms in a part of the city that now is the locus of the Midwest tech community. The neighborhood — transformed over the past 20 years from what had been a stagnant industrial corridor — is abuzz during the day with worker bees, many of them young, and alive at night with restaurant goers and others. If even developers in trendy Fulton Market district aren’t able to finance their projects, what does that say about the economic health of Chicago more broadly? What we hear from those making the pitches to institutional real estate investors is that even the most surefire neighborhood in Chicago is perceived these days as too much of a risk on which to bet big money. Sure, interest rates are higher than they were several years ago, and that’s a factor. Banks have pulled back on what percentage of a project’s cost they’re willing to finance, which means developers must rely more on private equity than before. But developers in many other cities are getting their deals done in this interest-rate environment. There’s no getting around it, and developers are hearing it directly from their go-to sources of cash: Chicago under Mayor Brandon Johnson is considered too unpredictable. Last year, the mayor proposed a $300 million property tax hike. The City Council rejected that, and now this year the mayor is proposing to bring back the hated “head tax” on companies employing 100 or more in the city. At the state level, his administration is lobbying for all manner of major tax increases on business and the affluent, including a nearly one-percentage-point increase in a state corporate income tax that is among the nation’s highest. We’ll see what becomes of the contentious head tax as the council considers Johnson’s budget in coming weeks, but investors already have heard the message loud and clear. If it’s not a head tax or a property tax hike today, it will be something else tomorrow. To their way of thinking, a real estate deal that makes sense financially at today’s tax rates may well be far less favorable in just a few years. What will their returns be when they seek to liquidate their investment? In today’s Chicago, institutional investors can’t predict. And so they take a pass. Even in Fulton Market district. In assessing Johnson’s economic record as mayor, we’ve heard allusions many times to how few cranes are in Chicago’s skies. Even if the metric is overused, there’s no doubt cranes are a useful indicator of the state of Chicago’s economy. If even a few of those 20-plus ready-to-go projects in Fulton Market, most coming in at well over $100 million, get financing, you easily could see Chicago’s crane count double in just that geographically contained part of the city alone. Alas, we don’t see that happening during this mayor’s tenure unless he can convincingly signal to investors that he will make stabilizing the city’s finances a priority and do so in a balanced fashion that entails right-sizing city government and a bloated public school system before going to taxpayers for more revenue. Chicago business leaders long have preached that the best way to generate more cash for city coffers is to jump-start economic growth: bring on more economic activity, more workers, more residents, more hotel visitors. That leads to greater tax receipts, not by forcing those who’ve already bet on Chicago via their investments to pay more to the taxman but by expanding the tax base. Fulton Market district right now is a heavyweight with one hand tied behind its back. For the sake of all Chicago, a two-fisted Fulton Market needs to jump back in the ring.
