Quote of the day – South Loop land is worthless for apartments

Every successful real estate developer I’ve ever known has distilled his experience into a few simple calculations that enable him to quickly analyze very complex deals and decide to move forward on or reject a deal. Add a gut feeling, based on a lot of knowledge, for the viability of the site, and an analyst may be directed to produce a very complex spreadsheet that justifies the developer’s decision, and appears to be the basis for it.

Steve and Randy Fifield recently sat down for an enthralling chat with students in Remo Picchietti‘s entrepreneurship class at DePaul’s Kellstadt Graduate School of Business.

Steve is a self-described quant whose early ambition was to become a college math professor. Here’s one of the rules of thumb he shared with the students:

Rents are low enough in the South Loop that land today is basically worth nothing for apartments.

Every ten cents of rent is worth about $13,000 a unit in land value. If rents in River North are $2.90 a [square] foot and they’re $2.20 in the South Loop – which are facts – that 70 cents means that the site in River North … that’s a [large] swing between them.

What it really means is that if the land is worth $50,000 a unit in River North, it’s a minus on that site right there [pointing to the South Loop].

The segment that includes the above quote begins at about 38:00 in the above video. If you have time to watch the whole thing, we’re confident you’ll find it fascinating.


  • the urban politician 6 years

    How do they come up with these calculations?

  • tup,

    It’s not something that you can easily reverse engineer, but requires immersion in the elements of the cost structure of a spectrum of projects.

    I don’t know enough to venture a guess on the specifics of this one.

  • Pete 6 years

    Of course, much of the South Loop is no-man’s land which is why it is full of worthless condos as well.

    Printer’s Row and Museum Campus are nice areas, but I can’t fathom why anyone would want to live in South Loop much south of McCormick place.

  • Not something you need to spend much time on, Pete, since the South Loop doesn’t extend south of McCormick Place.

  • Simon 6 years

    Pretty sure he’s just talking his book here. His k2 building is further west compared to the south loop and not that much further north, however I don’t here him saying anything about how much that land cost him.

  • Simon,

    Not that much further north? The Fulton River District is nowhere near the South Loop. It’s a very different location.

    Fifield doesn’t discuss his land costs for K2 in this context because it isn’t relevant to the point he was making to the students. “Talking his book” would be equally irrelevant, and no new South Loop project can come online in time to compete with K2’s opening, so it’s highly unlikely that played any part.

  • Simon 6 years

    So amli bought worthless land at Polk/Clark? Golub bought worthless land at state/9th. The land at praire/16th was worthless when it was purchased or is it only worthless when fifiled does not own it?

  • jeff 6 years

    I give Fifield credit for making this kind of presentation. It’s not normal.

  • Jeff,

    You’re right on target in seeing this as unusual. It’s a very rare, very candid look behind the scenes of higher-echelon real estate development.

    It’s even more unusual for their being willing to share this with a broader audience on YouTube.

  • Pete 6 years

    “Not something you need to spend much time on, Pete, since the South Loop doesn’t extend south of McCormick Place.”

    I don’t think it does either, but some people seem to think so. That is, if they’re trying to sell something south of there.

  • the urban politician 6 years

    What this does teach us is that South Loop land may be worth buying and sitting on for a while, if you can afford the property taxes.

    There is no doubt in my mind that, long term, the South Loop’s heyday will eventually come, it’s only a matter of time.

    • SheridanB 6 years

      Maybe future development will simply skip or bypass the south loop entirely?

      • the urban politician 6 years

        What the hell does this comment have to do with the opinion I expressed above?