The building stands to provide clues on the post-COVID future of one of the city’s most famous tourist and shopping destinations, which has seen retail vacancy jump with major chains moving out amid the public health crisis and property values plummet at Michigan Avenue staples Water Tower Place and the Shops at North Bridge.
Colliers is framing the 54-year-old building at 500 N. Michigan Ave. as an opportunity to turn most of it into something else, suggesting the 321,000-square-foot office portion of the tower—which is nearly 70% vacant—could be repurposed with a residential, senior living, medical office or hospitality use, or some combination of them. The building includes separate low-rise and high-rise elevator banks that could serve different users.
While office demand has been sluggish during the pandemic, demand for downtown apartments has recovered past pre-crisis levels, and medical office uses have become more popular on and near North Michigan Avenue with the growth of Northwestern Memorial Hospital and Lurie Children’s Hospital in neighboring Streeterville.
The flyer plays up the tower’s proximity to the intersection of Michigan Avenue and the Chicago River, which in recent years emerged as the Mag Mile’s center of gravity with the redevelopment of Tribune Tower, a massive renovation of the Wrigley Building and the debut of a glassy Apple store along the river in 2017.
Schapira’s building lost a slew of small office tenants since his venture paid $86 million for the property in 2017, when about two-thirds of the building was leased. Its roughly 15,000-square-foot floor plates were out of style for many users despite strong demand for workspace before the pandemic, and the lease-up job got even harder when the public health crisis fueled the rise of remote work and clobbered the downtown office market.
The ownership venture had much more success with the retail space on the lower floors of the building, where it spent close to $20 million renovating and adding a new facade wrapping around the first two floors. Schapira inked a deal in 2019 with Chick-fil-A to occupy space vacated by the Purple Pig restaurant, kept Bank of America as another retail tenant and signed a deal in 2020 with shoe and apparel company Vans to open a store on the building’s northeast corner.
The Schapira venture refinanced the property in 2019 with a $94 million loan, according to Cook County property records.
The flyer said the retail portion of the tower is fully leased with a weighted average lease term of 10 years, a measure of the tenants’ remaining lease commitments. Colliers frames that retail revenue as a source of income to help fund a repositioning of the rest of the building.
Some investors have bet on the Mag Mile’s future as COVID restrictions have begun to wane. A Texas investor last month paid $94 million for the 196,000-square-foot Neiman Marcus building at 737 N. Michigan Ave., property records show. That building was also thought to be a redevelopment candidate, but the buyer isn’t a developer and has signaled it aims to keep the property as is.
Another high-rise just off the Mag Mile looking for a developer to give it a shot of life is three blocks north of Schapira’s building at 101 E. Erie St., in the shuttered Conrad Chicago hotel. The owners of that property were hit with a $70 million foreclosure lawsuit in late 2020 and have been quietly marketing the hotel to prospective buyers in an effort to resolve the dispute.
Colliers’ John Homsher and Alissa Adler are marketing 500 N. Michigan Ave. on behalf of the Schapira venture.