Answer extracted from the The Crexi Commercial Real Estate Podcast — listen to the full episode below.
How do underperforming office properties in Chicago find viability through adaptive reuse?
Many underperforming Class B and C office properties in Chicago occupy excellent locations along major transit corridors, near strong school districts, or on industrial-zoned land—positions that make them viable candidates for conversion to industrial, multifamily, or retail uses. Determining which conversion path works requires understanding Illinois municipal zoning codes and evaluating whether the site's logistics and infrastructure can support the proposed new use.
Chicago's aging office stock, much of it built between 1960 and 1999, is concentrated in neighborhoods with strategic advantages that were originally valuable for office tenants. These same locations often hold equal or greater value for other asset classes. The key insight is that location excellence does not disappear when the office market weakens—it simply makes the real estate attractive to a different buyer or use.
When evaluating an adaptive reuse opportunity, the first step is a thorough analysis of the site's zoning constraints and practical logistics. Not every property can be converted, regardless of how attractive the location may be. The feasibility depends on whether the current zoning permits the new use, whether neighboring industrial or multifamily operations can function in that specific location, and whether the building's physical characteristics—loading dock access, parking, floor plates, ceiling heights—align with the demands of the new tenant base.
As detailed in the episode, Gordon recently completed an industrial conversion deal on a five-acre site in an industrial park where the existing owner could break even or achieve modest returns despite the property's poor performance in the office market. This outcome demonstrates that adaptive reuse does not always require the seller to take a steep loss; the right use can restore viability and profitability.
Gordon Lamphere — Vice President at Van Vlissingen & Co., the Midwest's oldest private commercial real estate firm. A fourth-generation real estate professional with a Juris Doctor from Tulane University Law School specializing in maritime and logistics, Gordon advises owners, tenants, and investors across more than 100 transactions annually throughout greater Chicagoland and hosts The Real Fines, Chicago's leading commercial real estate podcast.
The process requires both legal and operational expertise. Understanding municipal code variations across Illinois jurisdictions—Chicago's rules differ from suburban zoning requirements—is essential to avoid pursuing a conversion that cannot win regulatory approval. Similarly, evaluating logistics means assessing truck routes for industrial use, or understanding parking and unit mix requirements for multifamily conversion.
A successful adaptive reuse strategy combines three elements: prime location, correct zoning or path to rezoning, and realistic assessment of whether the new user's operational needs fit the site. When all three align, a Class B or C office building that was failing in the market can become a value-generating asset in a new role. The alternative path is not always a distressed sale or demolition; it is often a deliberate conversion tailored to what the Chicago market needs today.
See also
What is the current condition of different office market segments in Chicago?
Class A office in Chicago is performing relatively well with landlords leasing space regularly, though not as robustly as pre-COVID; the real challenge is Class B and C office properties struggling to maintain occupancy and remain economically viable.
How does a broker's client selection process change as their track record and reputation grow?
As success builds, brokers shift from accepting nearly every prospect to receiving multiple inquiries daily and becoming selective; this allows them to focus on clients aligned with their expertise and values rather than chasing volume.
What limitations exist when relying solely on artificial intelligence for property valuation in commercial real estate?
AI is ultimately programmed to keep users invested rather than seek objective truth; human brokers regularly catch valuation errors and missed risk factors that algorithms overlook in complex transactions.