Chicago's Office Conversion Boom Has Arrived. Here's How Developers Are Making It Happen

Chicago is setting the tone across the country when it comes to residential conversions, but the day-to-day work of making those adaptive reuse plans a reality is full of intricate challenges.

The predevelopment process includes identifying financing mechanisms to target appropriate buildings for conversion and utilizing new technologies to map out building designs, panelists said at Bisnow’s Chicago Repositioning and Conversions Summit.

While many in the industry understood there would be a glut of office space primed for an undersupplied housing market, initial conversion progress was slow, W.E. O’Neil Construction Vice President of Preconstruction Chad Huber said at the event, held at the Calumet Business Center. 

Now, it is picking up steam. 

“We definitely see the light at the end of the tunnel, especially thanks to the city and the money that they're pushing in,” Huber said. “But I think there's still a lot more to do.” 

Chicago has the third-largest pipeline of apartment conversions in the country, at just over 5,000 units, trailing only Los Angeles and Manhattan, according to RentCafe data. The city completed 880 units from adaptive reuse in 2024, a 400% increase from 176 units in 2023 and the most in the country last year. 

The city plays a large role in fueling this growth, with its LaSalle Street Corridor initiative helping to partially back six of these conversions through tax increment financing. The program is expected to add about 1,800 new residential units to the total supply, with hundreds of thousands of square feet of older office space getting removed from the city’s inventory.

DL3 Realty Managing Partner Leon Walker, one of the developers behind the 135. S. LaSalle St. conversion, said the financing to make conversions work pulls from many different sources. His project, at an estimated total cost of $241.5M, is supported by $98M in city subsidies and historic tax credits. 

“Here in Chicago and many of the U.S. cities, we have to use the lasagna financing of TIF and tax credits — historic and others — rebates and incentives,” Walker said. “It gets to be a lot more complicated, and it does take a little bit more time.”  

Additional conversions that are taking place without specific city support — a total of 13, according to Department of Planning and Development Deputy Commissioner Cindy Chan Roubik — are likely utilizing other state incentives to finance their projects, Walker said.

Once projects are financed, technology such as drones will help to evaluate roofs, walls and other conditions at a particular site, BTL Architects principal Delph Gustitus said. With technology continuing to advance, he said he could see a not-so-distant future in which architects could generate 3D drawings and models of those spaces, too. 

McHugh Construction Chief Operating Officer Ray Cisco said predevelopment work significantly improves the design process. 

“Knowing what we're going into is extremely beneficial,” Cisco said. “If we can get in there earlier and technology can let us see what's behind the walls, then the teams can all design it better.”

The final key to making adaptive reuse work is managing the tenants currently occupying the planned conversion space or communicating with those in spots around the work. While building out some of these new spaces, developers may have to work odd hours around in-place tenants on the property and negotiate early exits for other tenants. 

Mavrek Development Chief Investment Officer Anthony Hrusovsky said the biggest challenge with a conversion can be an existing tenant roster. He said he weighs lease timelines and expiration dates when considering an opportunity. 

“How likely are people to play ball, and how likely are people to extort you? It's the reality of it,” Hrusovsky said. “If someone knows that you own this building and you are going to push for this conversion, it's a payday for people.” 

Jonathon Cordell, principal at WindWave, said communicating with existing tenants while construction is ongoing is the best way to get them on board. During conversion work at WindWave’s project at 111 W. Illinois St., the team has tried to be honest with the ground-floor retail tenants about the build-out process. 

“It’s no surprise to them that 200 units being built on top of them is going to hurt a little bit, but they're also pretty excited about 200 units being built on top of them,” Cordell said.