New condos downtown have gotten steadily pricier in the last several years, as this recent Chicago Tribune story notes. Just a few years ago, homes in the $500- to $600-per-square-foot range were considered “ultra-luxury” – top of the heap. Now the generally accepted benchmark for this category is $700 per square foot. Our scan of the current ultra-luxury market in Chicago shows at least 10 downtown developments with condos that crack $1,000 per square foot.
Why the rise in prices? Gail Lissner of Appraisal Research Counselors, which tracks the new-construction condo market downtown, says it’s part of the overall growth in the market for new homes in the city’s center, which began to take off with the first adaptive reuse projects in the early ’90s. A wave of new construction followed. “As the market has matured, we’re seeing larger projects, more luxury products, better located products,” she says.
Housing analyst Tracy Cross, of Schaumburg-based Tracy Cross & Associates, has a different take. The higher prices have less to do with demand and more to do with developers defraying costs. “The same stuff is selling at $100 a foot more than it did three years ago, due to price of land and construction cost,” he says.
Developers wanted to charge more without raising a condo’s “chunk price,” or whole-dollar amount, he says – that’s the number that really counts when it comes to people’s wallets. So they started building smaller units with higher prices per square foot: “All the builder community did was adjust square footage down to protect the chunk price.”
They justified the increase to buyers by adding amenities and services, he says. “You may have different levels of features, or Canyon Ranch carrying the flag of hot stones with them,” he says, referring to the extensive spa services at Canyon Ranch Living – Chicago, Related Midwest’s 67-story tower proposed for 680 N. Rush St. “But it is in fact more of a price adjustment and cost adjustment than market adjustment. Incomes haven’t risen at the rate that comparable price per square foot has been generated.”