The Ritz Carlton Residences in Chicago is breaking into a neighborhood traditionally known for luxury retail and high-end office space. And it's not alone. Over the past eight to 10 years, there has been a shift in Chicago from traditional residential locations such as the Gold Coast to Michigan Avenue.
“Right now, we have a number of projects engaged in marketing and a slowing housing market,” says Gail Lissner, vice president at Appraisal Research Counselors in Chicago. “In the short term, it will be more competitive for developers, but as a long-term development strategy we certainly see strong and increasing demand for luxury housing downtown.”
The newest project to begin marketing is the 2,000-ft. tall Chicago Spire, which will add roughly 1,200 new ultra luxury units to the market this year, says Lissner. Ultra luxury condos are defined as units priced between $700 to more than $1,200 per sq. ft. As of the third quarter of 2007, before the Spire began sales, there were 1,515 ultra luxury units in nine buildings, 60% of which were under contract. Those units will be released between 2008 and 2011.
The increase of such projects establishes a noticeable change in the skyline. Condos “create residential pockets” to capitalize on the area's amenities that didn't exist previously, says the project's developer, Bruce Schultz of Prism Development Co. based in Chicago.
The Ritz Carlton will sit alongside Neiman Marcus, Bloomingdale's and other high-end residences. Marriott owns the Ritz Carlton brand and benefits from management and distribution fees paid by developers, according to analyst Smedes Rose of Keefe, Bruyette and Woods in New York.
Indeed, the Ritz is just one of a number of branded luxury condo projects in the Windy City. Others include the Trump International Hotel & Tower, the Mandarin Oriental, the Waterview Tower with five-star Shangri-La Hotel, and Canyon Ranch Living.
The Ritz will break ground between the Omni Hotel and Erie Street. The $235 million project, designed by Lucien Lagrange Architects of Chicago, is financed by private investors and will include 86 residential units, from one to three bedrooms, and two penthouses.
Schultz boasts that the Ritz will be the only private residence in Chicago with a 24-hour, 12-member staff, which includes chef, valet, porter and club servers who will change linens, walk dogs, serve meals and plan tenants' calendars.
Construction will begin in September and is slated for completion in late 2009. Typical buyers are empty nesters who want worry-free living and the convenience of the downtown location.
Comfort at the Ritz comes at a premium price. One bedrooms range from $2.1 to $2.2 million. Two bedrooms sell from $1.6 to $3.2 million, and three bedrooms sell from $4.9 to $5.1 million depending on amenities and square footage. Penthouses are priced from $10.9 to $11.5 million. Forty percent of the space has been pre-sold.
Is this a new era in residential development? Maybe not. After all, the area was called Millionaires' Row in the 1920s when opulent private homes occupied the space, says Janet Hope of Sudler Property Management for nearby luxury condo tower, 55 East Erie. “High-end penthouses are selling faster than smaller units,” she says. Ritz Carlton is banking on this continued trend.