Mandarin’s Chicago troubles another example of bad planning
Even big names aren’t exempt from the nation’s real estate slump.
Crain’s Chicago Business, a top business newspaper, reported in early December that a Mandarin Oriental hotel/condominium project near Chicago’s Millennium Park is facing financial difficulties that may be enough to scuttle the highly anticipated project.
The project’s architect and another contractor are seeking to collect more than $3 million in past dues on the project.
The news again reminds me of how shortsighted real estate professionals can be. Two years ago, a swarm of developers descended on Chicago to tackle the hottest new residential trend: hotel/condominiums. The concept is a simple one: Residents own their own condominium units in high-priced hotels in the best locations in the city. When the residents aren’t using these units, they allow the hotels to rent them out to guests. The hotels and residents, under agreements that differ with each project, split the rental income.
The problem is, too many developers all tried to build hotel/condos at the same time in downtown Chicago. The city already has a big-name hotel/condo from the Trump brand opening soon. The well-respected Shangri-La hotel chain is currently building a hotel/condo project near the Chicago River in one of the busiest sections of downtown Chicago. Canyon Ranch Living, known for its wellness center spas, is also planning a hotel/condo in Chicago.
And these are just some of the players who had come with their hotel/condo projects. Others have come and gone, their plans never getting off the ground. Even Donald Trump is having problems with his Chicago project. Sales, after a good start, have fizzled a bit, and proposed openings have been pushed back.
What’s happening with these projects? It seems that developers have again gotten too greedy. We’ve seen this time and time again: Someone decides that a certain market or business model is hot, and developers and builders flock to it. They oversaturate the market, and then projects begin to fold.
It was easy to predict two years ago that this would happen in Chicago. The city market can only support so many hotel/condo projects. Just ask the folks behind the city’s now-struggling Mandarin Oriental project.
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