On a cold Monday morning in early January, sales kicked off for the latest crop of condominiums at One Museum Park, a planned 61-story high-rise at the southwest corner of Roosevelt Road and Lake Shore Drive that will tower over the Central Station neighborhood.
Sales of the 286 units there were so brisk and strong in that one day "that it felt like a trading floor," said Nadine L. Ferrata, a real estate agent with Coldwell Banker.
That desire for luxury housing in the South Loop and surrounding area is what is fueling a strong escalation of square footage costs for residential real estate, said local officials. In fact, prices are climbing so quickly that some officials are wondering "how high is up" for the South Loop.
"We're all holding our breath," said Fred Scovell, an agent with Sudler Real Estate Services. "Frankly, I'm amazed."
"We're definitely seeing a spike in prices, and we're seeing more luxurious products being developed in the South Loop," said Gail Lissner, vice president of Appraisal Research Counselors, a Chicago-based consulting firm.
What is typical for the area now are square footage prices in the mid-$300s to $400s-plus range, officials said. "And that can be without parking," Ferrata said.
Those levels are a significant jump from a few years ago, when $300 a square foot was thought to be unattainable, Ferrata said.
Several recent South Loop projects-such as 1000 S. Michigan, the Columbian at 1180 S. Michigan Ave., Library Tower at State Street and Congress Parkway, and the rehabbed Metropolitan Tower (formerly the Britannica Center) at 310 S. Michigan-have boasted square-foot prices ranging from the mid $300s to the high $400s.
Looking ahead, Ferrata said of the 10 new residential projects expected to be announced for the South Loop in the next six months, about half of those buildings will feature square footage costs of $400 or more.
And, for the first time ever in the South Loop, a handful of projects are featuring homes that are inching up to the $500-a-square-foot line. "It's getting real close," Scovell said. "Those types of prices are the norm in River North and New East but not the norm in the South Loop yet."
A few developments have already crossed the line, Ferrata said. According to her calculations, a number of the properties for sale in One Museum Park are hovering at more than $650 a square foot. "It's the most expensive building in the neighborhood but also the nicest amenity-wise," she said.
Officials are quick to point out, however, that square footage costs in the South Loop are still lower than those to the north. In high-end residential projects such as the Palmolive Building and the yet-to-be constructed Trump Tower, square footage costs have easily reached $1,000, officials said. "The South Loop is still the better deal," said Mabel Guzman of Century 21 SGR.
And, of course, the South Loop and the rest of Chicago are still far behind the $2,000-a-square-foot residential properties in Manhattan can command.
At $500 per square foot, however, a 1,000-square-foot condominium-which is roughly about half the size of the typical single-family home in the suburbs-becomes a $500,000 property.
Local officials are also quick to point out that to command $500 plus per square foot, a building has to offer the best perks: world-class views, a good location, and snazzy building amenities-ranging from in-house spas and roof terraces to hospitality rooms and business centers.
Also fueling this trend is the fact that the South Loop is becoming fashionable, according to Ferrata and others, thanks to the influx of restaurants and retail.
"The more services we get, the more appreciation we'll see," Ferrata said. "We won't see $1,000 a square foot without a Mag Mile, but things will appreciate."
"There is a strong base of people willing to pay a lot of money to live in the South Loop," Lissner added.
How high square footage costs could go in the South Loop is anyone's guess, Ferrata said. "Who the heck knows, especially if we're getting a 4 to 6 percent appreciation across the city every year," she said.
"The South Loop has the land," Scovell said. "That's key."
"There is still lots of room to grow here," Guzman said. "You could say the sky is the limit."
A lot of the new residential products coming online in the South Loop will also continue to be marketed as high-end, luxury products, again raising square footage prices, Lissner said. "That seems to be what buyers want," she adds.
Currently, mortgage flipping-where investors buy a property to sell as an investment rather than occupy-isn't as big a factor in escalating prices as it is in some North Side neighborhoods, Lissner said.
As square footage costs go up, it also brings up a tougher question of whether the middle-class buyer who could once well afford a property in the neighborhood could even think about purchasing a property there today, Guzman said.
"Where do you draw the line, especially when the city wants affordable housing in the city core?" she asked. "The escalating square footage costs may limit some of the type of buyers we're seeing here now."
"What you also have to calculate into the square footage costs is the cost of taxes-which are now running some buyers $8,000 to $11,000 per year-and the cost of an assessment, which can run $500 a month," Scovell said. "You would think there has got to be a breaking point somewhere. I find it hard to understand the economics."
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