T E C H N I C A L A S S I S TA N C E P A N E L

JULY 26-27 , 2007

INDUSTRIAL RENAISSANCE:

ESTABLISHING A CREATIVE INDUSTRIES DISTRICT

CERMAK ROAD, CHICAGO

The Campaign for Sensible Growth is a coalition ofgovernment, civic and business organizations pro-moting strategies to enhance the economic vitality ofthe greater Chicago region while preserving openspace, minimizing the need for costly new infrastruc-ture, and improving the livability of communities.

More than 200 organizations and 1,000 individualsare members of the Campaign, including ULI Chicago.The Campaign is co-chaired by the MetropolitanPlanning Council and Chicago Metropolitan Agencyfor Planning.

The Campaign thanks the following supporters of itstechnical assistance work:The Allstate FoundationBank of AmericaGaylord and Dorothy Donnelly FoundationThe John D. and Catherine T. MacArthur FoundationMcCormick Tribune FoundationWashington Mutual

ULI Chicago, a District Council of the Urban LandInstitute, has more than 1,300 members in theChicagoland area who come together to find solutionsand build consensus around land-use and develop-ment challenges. The Urban Land Institute’s missionis to provide leadership in the responsible use of landand in creating and sustaining thriving communitiesworldwide.

ULI Chicago gratefully acknowledges the support andongoing assistance of its Sustainers:Chicago Title Insurance CompanyCrown Community DevelopmentEpsteinLaSalle BankOWP/P, Inc.Shefsky & Froelich Ltd.The Walsh GroupU.S. Equities Realty

CONTENTS

1 ON THE WATERFRONT

3 REANIMATE AND REINVENT THE DISTRICT

4 QUESTIONS FOR THE PANEL

5 CREATIVE INDUSTRIES AS AN ECONOMIC ENGINE

8 WHAT IS A CREATIVE INDUSTRIES DISTRICT?

9 OPPORTUNITY AT HAND: THE SPICE BARREL CREATIVEINDUSTRIES DISTRICT

15 IS IT FEASIBLE? THE FINANCIALS

19 RECOMMENDATIONS FOR IMPLEMENTING THE SPICEBARREL CREATIVE INDUSTRIES DISTRICT

21 SPICE BARREL: CREATIVITY, COMMERCE, COMMUNITY,AND CONVERGENCE

CERMAK ROAD, CHICAGO

Front Cover: The Hoyt building (left) and Thomson & Taylor Spice building (right) are joined by theCermak Road bridge, which connects Chinatown to Pilsen. Photo: Michael Davidson

Inside Front Cover: Looking north from the Thomson & Taylor Spice building, along the south branch ofthe Chicago River. Photo: Michael Davidson

INDUSTRIAL RENAISSANCE:

ESTABLISHING A CREATIVE INDUSTRIES DISTRICT

ON THE WATERFRONT

On the bend of the Chicago River on the city’snear southwest side sit four largely vacantindustrial buildings whose bricks and mortarcarry the ‘DNA’ of Chicago. Built in the earlyyears of the 20th Century, these four land-marked buildings — just 1.5 miles from theLoop — housed the massive food, spices, barrelmakers, and other industries that launchedChicago’s reputation as the city that works. W.M. Hoyt & Co., Wendnagel & Co., WesternShade Cloth Co., and Thomson & Taylor SpiceCo., built these industrial behemoths — withmore than 800,000 square feet among them —

at the tri-corners of Jefferson and Lumberstreets and Cermak Road, where the twinengines of rail and water converge.

Chicago at the turn of the century was a giantfactory unto itself. Sitting in the middle of a rap-idly expanding country, the city welcomed rawmaterials in one door and shipped products outthe other. River and rail were the backbone ofthis production, and the cluster of buildingsalong Cermak Road was a key hub of com-merce. Every morning, thousands of workersstreamed across the Cermak Road bridge, itselfa marvel of engineering, for another day’s laborat the Hoyt (465 W. Cermak), Wendnagel (2130-46 S. Jefferson Street/600 W. Cermak Road),

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An illustration of the study area shows where water, roads and buildings converge to create what one panel member called “anextraordinary urban room.” The four landmarked buildings and the landmarked bridge are depicted in pink.

Western Shade Cloth (2141 S. Jefferson), andThomson & Taylor Spice (500 W. Cermak) buildings.

The din of the hustle and flow of raw commercecould be heard for blocks, as workmen in theWendnagel building hauled redwoods off theships from California, planed and cut the rawtimber, and bent and formed the wood into thewater barrels and tanks that would revolutionizefire safety — and which to this day dot theroofline of the city.

Across the street at the Thomson & Taylor Spicebuilding, men moved the massive shipments ofbulk spice and teas along the production line,through the grinders, and up to the fourth floorwhere the tea and coffee tasters sipped the final

product before it was packaged and shipped tolocal grocers throughout the Midwest.

Like the city itself, the warehouses were self-contained factories, with ships unloading rawmaterials stem to stern onto the docks whiletrains were loading finished goods to depart forthe newly settled West. These buildings, saidTim Samuelson, cultural historian, ChicagoDept. of Cultural Affairs, “worked for a living.”

The river is quiet today, and the commerce ofthe information age has moved to highrises ofthe nearby Loop. But the ghostly echoes of thatindustrial clamor linger in the halls and floors ofthese massive structures. Some say, on a warmday, you can even catch a whiff of coffee andspices.

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The historic Cermak Road bridge connects the W.M. Hoyt building, in the distance at right, with three others to the west of theChicago River, including the Thomson & Taylor Spice building, at left.

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In April 2006, recogniz-ing the historic and archi-tectural significance ofthese buildings and theirsurroundings, theChicago City Council des-ignated the area a land-mark district, the onlyone in the city located ina Planned ManufacturingDistrict (PMD). A PMDrestricts the sites toindustrial uses, and asSam Assefa, deputy com-missioner, Chicago Dept.of Planning &Development, explained,a PMD is designed toprotect the manufactur-

ing job base of the city. The district contains thefour buildings and Cermak Road bridge, the lastremaining moveable Scherzer rolling lift bridgein Chicago, a “ballet dancer in steel,” asSamuelson called it. The district figuratively andliterally bridges the communities of Pilsen to thewest and Chinatown to the east, with the SouthLoop, Bridgeport, University Village, andBronzeville.

Today, the district sits poised for reinvention asa 21st-Century industrial corridor centered on a21st-Century economy: what economist RichardFlorida calls “the creative class” of “highbohemian” workers who spur economic devel-opment.

The vision of the city is to create a vibrant, eco-nomically viable district centered on creativeindustries, ranging from fine arts, film produc-tion and fashion, to engineering and informa-tion specialists and other professionals who cre-ate and innovate. The city’s goal is to put new

uses into these four historic buildings, and, inthe process, create jobs and opportunities forthe surrounding communities. As urbanist JaneJacobs said, “new ideas start in old buildings.”

REANIMATE AND REINVENT THEDISTRICT

With the goal of revitalizing this area into onethat supports the creative industries, theChicago Dept. of Cultural Affairs (DCA), Dept.of Planning and Development (DPD), and Ald.Daniel Solis (25th Ward) asked the Urban LandInstitute Chicago District Council (ULI) andCampaign for Sensible Growth (Campaign) toconvene a Technical Assistance Panel (TAP) ofreal estate development experts, urban planningand design professionals, and community devel-opment leaders. The goal was to create a plan

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Cultural historian Tim Samuelson (center) leads the panel on a guided tour of the studyarea, which gave panel members the opportunity to see the site first-hand, ask ques-tions, and take photos for later analysis.

“The panel hasprovided an excit-ing opportunity tobring ... communi-ties together andcreate jobs ...They’ve given us ablueprint as ajumping off pointto begin to makethis a reality.”

DAVID BETLEJEWSKI,EXECUTIVE DIRECTOR,EIGHTEENTH STREET

DEVELOPMENT

CORPORATION

to “retain and reanimate the district,” as DCA’sBarbara Koenen put it.

“This is an interesting and timely challenge,”said TAP Chair Julia Stasch, vice president forU.S. programs, John D. and Catherine T.MacArthur Foundation. “The city is on a contin-uing path of growth and change.”

The panel was the 19th TAP ULI Chicago andthe Campaign have convened in the Chicagoregion since 2001. Based on the ULI nationalmodel, each TAP is assembled by request of acommunity to address specific developmentchallenges, such as downtown revitalization,planning for retail growth, neighborhood devel-opment, or environmentally sensitive develop-ment. Whatever the call, TAPs create an actionplan for the communities.

“We’re not swooping in as experts,” said Stasch,of the TAP panel’s recommendations. “We’reoffering ideas on how existing assets can helprealize local, citywide, and even regional aspira-tions.”

Before the two-day meeting, on July 26 and 27,2007, TAP volunteers received detailed back-ground information, a problem statement, andspecific questions the community would like thepanel to address. ULI, the Campaign, the spon-sors, and community stakeholders also heldseveral preparatory meetings. The intensive two-day working session was then reserved for on-the-ground community input and planning, cul-minating in a set of concrete recommendationsthat the community can consider and imple-ment. The ideas and proposals that arose fromthe TAP are both novel and grounded in reality,given the extensive experience of the panelists.

QUESTIONS FOR THE PANEL

“We want to think about new industries for thisarea,” said Assefa. “We want to create a syner-getic relationship between what could come andwhat is here.” Reflecting this potential, the TAPsought to address the following questions:

• What are the market demands and finan-cial feasibility for creative industry realestate in Chicago that are appropriate foran industrial corridor?

• What specific space requirements areneeded by the creative industries?

• What market needs of the creative indus-tries can be served by these four buildings?

• Can the buildings be renovated in a cost-effective manner to meet the marketdemand?

• How would these uses complement sur-rounding industrial uses in the corridor?

• How would these uses fit into the neighboring communities of Pilsen andChinatown?

• How much of the demand for these usescan serve the surrounding area’s Latinoand Asian creative arts industries?

• How should the district be managed?

• What steps can the city take in the implementation, creation and nurturing ofthis district, including marketing andincentives?

• How can local organizations be involvedin the creation and nurturing of this district?

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The panelists received critical input throughinterviews and a reception with community resi-dents, business owners, artists, and organiza-tions directly affected by any future redevelop-ment. They also talked with the current ownersof the buildings and toured the site. Through astakeholder meeting, community interviews,and the local reception, more than 60 peopleprovided direct input to the panelists.

CREATIVE INDUSTRIES AS ANECONOMIC ENGINE

As Koenen reported, the arts are a vibrant forcein the city. “Chicago is home to more than80,000 artists. With 11 schools offering degreesin fine arts and 5,000 graduates annually, thecity has a steady infusion of new artists everyyear,” she said. Columbia College alone pro-duces 2,000 film students each year. Accordingto Americans for the Arts, as of January 2007,Cook County had 70,560 full-time equivalentjobs in 10,000 for-profit and nonprofit arts-related businesses. In the nine-county regionaround Chicago, the number of arts-relatedbusinesses totals 16,000, employing more than102,000 people. These businesses are the “highoctane” fuel that feeds the information econo-my, the fastest growing segment of the nation’seconomy. During 2005, the annual economicimpact of this nonprofit arts and culture indus-try spending, reported Koenen, was $1 billionfor the city, and that did not include for-profitcommercial businesses, she said, citing Arts &Economics Prosperity III by Americans for theArts.

Chicago, however, faces stiff competition fromNew York, Los Angeles, and cities and regionsabroad, including Canada. Granville Island, inVancouver, British Columbia, which serves 12

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A creative industries district would put Chicago in a league ofAmerican and international cities that see tremendous economicvalue in the arts and creative industries. (Top) Granville Islandin Vancouver, British Columbia, is a former industrial area withsawmills and steel factories that is now an economic engine forthe city with a large public market and galleries and shops.(Middle) MASS MoCA in North Adams, Mass., includes a col-lection of 19th-Century factory buildings that now house visual,performing and new media arts. (Above) Toronto’s DistilleryDistrict, a pedestrian-only village, is an adaptive reuse of a largeand beautifully preserved collection of Victorian-era industrialarchitecture, and is dedicated to promoting arts, culture andentertainment.

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million visitors annually from a $19 million ini-tial investment, successfully showcases the artsand creative industries. The Distillery District inToronto, which encompasses 50 historic build-ings, created 168 new businesses, including afilm studio where, ironically, the movie Chicagowas filmed. Mass-MoCA in North Adams,Mass., in a declining area in the far northwestpart of the state now attracts 120,000 visitorsannually even though the closest city, Albany,NY, is an hour away.

In Chicago, perhaps no neighborhood is so cen-trally identified with cultural assets and the artsas Pilsen, which encompasses the district in itsfar southeast corner. Pilsen is home to theNational Museum of Mexican Art and a vibrant

cultural life. The neighborhood also has a rela-tively affordable housing stock in a prime loca-tion close to the Loop, expressways, mass tran-sit, and Lake Shore Drive, making it a draw foremerging businesses and established artists.

Home to approximately 40,000 people, Pilsenincludes the largest Mexican community in thecity. The community is young — 80 percent ofits residents are younger than age 44, accordingto Census 2000 data, which translates into alarge and growing workforce. The city reportshome sales have doubled in the area since the1990s, and sales prices have increased by 131percent since 2002, with a median price in 2006of $282,000 — which also signals gentrifica-tion.1 A recent “quality-of-life” plan of the LocalInitiatives Support Corporation (LISC) Chicago’sNew Communities Program recommends build-ing on local cultural assets as one of the corner-stones in promoting economic and communitydevelopment in the future.2

Across the river from the Cermak area liesChinatown, which has experienced rapid rebirthas well, transforming from a restaurant-basedarea to an extremely diverse economic hub forimporting and exporting and a wide variety ofprofessional services. Its population is olderand growing slower than in Pilsen. In 2006, theArmour Square community area, of whichChinatown is a part, had a population of 12,454.3

Its location immediately south of the rapidlydeveloping South Loop makes it poised forbusiness and population growth, as it spreadsoutside of its traditional core just a few shortblocks east of the study area.

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Footnotes1 Memo from Maria Bousfield, demographer in the Chicago Dept. of Planning & Development, June 12, 2007.

2 The Nov. 2006 report, Pilsen: A Center of Mexican Life, was created with the input of hundreds of stakeholdersand led by the local Resurrection Project in Pilsen.

3 Chapin Hall Center for Children, “Children of Chicago 2007: A Community Assessment.” Chicago: Chapin Hall.

Cultural assets and arts are plentiful in Pilsen — from therenowned National Museum of Mexican Art to more “local”impressions, including this mural.

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WENDNAGLE: 2130-46 S. Jefferson St./600 W. Cermak Rd.Current owner: Philip MumfordSquare feet: 88,000History: Built in 1906. Chicago’s historic water tank manufacturer.Description: Only the original 1901-1906 building is land-marked. A large later addition lies outside the landmarkeddistrict.

THOMSON & TAYLOR SPICE: 500 W. Cermak Rd.Current owner: Donald MurneySquare feet: 350,000History: Built in 1911, and was home to one of the largestimporters of spices in the United States.Description: Bordered by the river to the east, the buildinghas direct water access. It is heavy timber construction.

W. M. HOYT: 465 W. Cermak Rd.Current owner: Peter Ing Square feet: 250,000History: Built in 1909 to house one of the largest whole-sale grocers in the region.Description: Concrete and brick, irregularly shaped build-ing and lot line following the curve of the river. The onlyone of the four buildings in the study area on the east sideof the river.

WESTERN SHADE CLOTH: 2141 S. Jefferson St.Current owners: Joseph Beale (50%) and Terrence Upton(50%)Square feet: 116,975 History: Built in 1924. Was home to a manufacturer ofcloth shades and window treatmentsDescription: Irregularly shaped, triangular parcel of land,with frontage on both S. Lumber St. and S. Jefferson St.Vintage timber and concrete industrial building. Only theoriginal building is landmarked. A large later addition liesoutside the landmarked district.

The Buildings of the ‘Spice Barrel District’

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WHAT IS A CREATIVE INDUSTRIESDISTRICT?

One of the first tasks for the panel was to devel-op a definition of what constitutes creativeindustries. To be fiscally viable and an economicand creative driver in the community, the paneldetermined the district should be a jobs-produc-ing hub, in keeping with the goals of thePlanned Manufacturing District (PMD). Thepanel recommended the district focus onattracting a variety of uses that are compatiblewith both Pilsen’s unofficial status as an artistcolony and the industrial surroundings. These

uses include design professions (i.e., architec-ture, urban planning, graphic design, engineer-ing, landscape architecture, information, soft-ware and technology design) as well as theentertainment arts, fashion and merchandising,publishing, culinary arts, film, dance, set design,museum and cultural institution support. Typesof spaces include rehearsal, storage, productionand office. A modest portion of the space couldbe set aside for artists’ studios and workspaces. A creative industry district could alsoinclude heritage uses, such as boat building or arail museum or technical preservation vocationtraining. Programs for training and education

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Architect and panel member Maria Botello drew a map of the study area. The legend identifies three critical features: the land-marked buildings and bridge in pink, adjacent and complementary industrial buildings in orange, and existing parking in green. Twoadditional features of note: the south branch of the Chicago River and the unique confluence of roads and bridges.

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should accompany production. The district alsocould include ancillary uses to support the cre-ative industries, including cafes, arts suppliers,storage, and screening rooms.

OPPORTUNITY AT HAND: THE SPICEBARREL CREATIVE INDUSTRIES DISTRICT

The panel affirmed the potential of establishinga district as a center of creative industries andsource of new jobs, which would allow Chicagoto take its place among leading art centersaround the world. The panel also envisioned itas a destination — creating the working title of“Spice Barrel Creative Industries District” —named for Thomson & Taylor Spice Co., and thebarrel maker Wendnagel & Co. Integratedstreetscaping, landscaping, and planned tenantmix would create a sense of place and connect,physically and culturally, the communities sur-rounding it: Pilsen and Chinatown most imme-diately, but also Bronzeville, the South Loop,

Bridgeport, and University Village. At ‘SpiceBarrel,’ the area’s rich heritage and cultural mixwould coalesce with the river, buildings, andurban grid to create a prized urban resource.

A creative industries destination would also put“Chicago on the map” locally and globally withthe creative industries community, said TAPpanelist Karen Alschuler, principal and directorof planning and urban design for SMWM in SanFrancisco, and one of the leading urban design-ers in the country.

“Artists,” said several in the arts communitywho were interviewed for the project, “are dyingto have a place like this in the city.” A centralcreative industries district not only would unitethe dispersed arts communities in the city, butwould also create synergies and spark creativity.Just being around fellow artists can be a catalystfor new ideas, said several of those interviewed.Built-in support networks can also help smallbusinesses flourish and grow. As one panel

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Loft buildings in the district provide exceptional space for design industries and creative uses.

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interview subject said, “The space you havedetermines the work you can produce. Rightnow, because most of us are in small spaces,experimentation is limited. You can think biggerand be more inspired in buildings [like those inthe district].”

Generating Jobs, Connecting FamiliesMoreover, ‘Spice Barrel’ could be a communityfocal point for area families and a source of jobsfor community residents and youth. Accordingto panel estimates, the district could create upto 1,600 jobs, based on the availability of

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Spaces between the three buildings west of the river could be used for a functional public space, as illustrated in the rendering above.

Concept renderingcourtesy of MariaBotello, MACON-DO CorporationArchitects andPlanners.

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800,000 square feetand the proposeduses for the build-ings. Panel interviewswith fashion industryprofessionals, forexample, revealedthat many garmentworkers operate fromtheir homes in Pilsen

or currently commute to the North Side forwork. ‘Spice Barrel’ could provide them largerspaces and shorter commutes. ‘Spice Barrel’also could offer training and internships in thecreative industries for local youth, as well asclasses and community events. Given the grow-ing role of the information and creative sectorsin the nation’s economy, internships, appren-ticeships, and other forms of on-the-job trainingcould provide valuable experience for youth.These opportunities also could create directpaths to the jobs in the district itself.

The district has great potential for families, as aplace for art classes and other events and activi-ties. Dedicating a space for banquets and otherlife celebrations could bring families into thedistrict and provide a vital link between theexisting festivals in Chinatown and Pilsen.

Creating a Focal PointThe apex of the creative industries district, thepanel recommended, should be the intersectionof Lumber Street, Jefferson Street, and CermakRoad. There, three of the four buildings con-verge into “an extraordinary urban room,” aspanelist Karen Alschuler described it.

With enhanced streetscapes (concentrated intwo blocks in all directions), contemporary sig-nage in multiple languages, and riverfront beau-tification, the Spice Barrel District could come

to life in this distinct public space. The improve-ments would complement the historic signifi-cance of the area and enhance the “walkabilityand friendliness” of the district. “It needs to beinviting,” said Alschuler, “It has to encourageyou to park, not drive through.” Way-findingsigns from the nearby roadways, including theDan Ryan and Stevenson expressways, and LakeShore Drive, should be created to guidemotorists. Creative lighting could be both fes-tive and an important safety feature of the area.

Green Space and Transportation LinkTo integrate the fourth building (the W. M. Hoytbuilding at 465 W. Cermak), which sits just eastof the bridge on the south side of Cermak Road,into the rest of the contiguous district, the panelproposed creating a public park along the river.The park could feature a contemporary design

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The historic Cermak Road bridge could serve as both a focal point of the Spice BarrelCreative Industries District and an enhanced vital link between Pilsen and Chinatown.

“You can think bigger and be moreinspired in buildingslike Hoyt orWendnagle.” INTERVIEW SUBJECT

AND CHICAGO ARTIST

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and serve as an outdoor “studio” for the cre-ative industries. The park would be located onthe eastern bank of the Chicago River at CermakRoad, across the street from the Hoyt building.

The unique “creative industries park” (see mappage 18) could provide river access to watertaxis that would connect Chicago’s downtown tothe district. In addition to adding docks forwater taxis along the river between the two com-munities, the city should make river edge

improvements, including environmental mitiga-tion (if needed) and a riverwalk, consistent withthe city’s overall plans for the Chicago River.

Finally, the panel recommended re-launchingthe Cermak Road trolley between Pilsen andChinatown as an added mode of transportationbetween the two communities. The trolley couldalso connect visitors to the CTA Red Line inChinatown, Orange Line in Bridgeport, and PinkLine in Pilsen.

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The proposed creative industries district does not lack access to potential amenities. (Top left) The panel suggested a riverwalk alongthe buildings and vacant parcels adjacent to the south branch of the Chicago River. (Top right) The riverwalk could also be accessiblefrom a panel-proposed “creative industries park” (now a gravel parking lot) at the northeast corner of Cermak Road and Canal Streeton the east side of the river. (Above) The district bridges two communities — literally — creating the need for more public trans-portation along Cermak Road. The panel recommended reinstating a trolley service to connect the CTA Red Line stop in Chinatownwith the Orange and Pink line stops to the west and southwest.

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Tenant MixMany of the community’s real estate profession-als interviewed, as well as the panelists and thebuilding owners, stressed the need for mixinguses in the four buildings. Relying solely or evenprimarily on small workspaces for independentartists, which currently market for approximately$2 per square foot, would not be economicallyviable on its own, they said, nor would it honorthe spirit of the PMD. Instead, the buildingswould need a mix of businesses, including

some larger and more established firms andperhaps complementary retail.

The panelists proposed that the four districtbuildings, with their large open floor plans,abundant natural light, and 360-degree views ofChicago, house a mix of businesses (see Table 1above and the graphic of the proposed tenantmix). On the ground floor of three of the fourbuildings could be 50,000 square feet of retailto reinforce the building uses (cafes, conven-

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Proposed tenant mix of buildings: The renovated buildings would include a variety of uses from retail on the ground floor to largedesign professional offices on the upper stories.

Table 1. Proposed Tenant Mix

Retail Ground floor 50,000 sq ft

Creative industry (small) First floor 50,000

Creative industry Mid floors 350,000

Creative office Top floors 350,000

Total 800,000

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ience stores, or supplies, for example). At firstthe rents for these retail operations might belower than standard market rates because of theinitial risk involved in entering a new market.(See more detail in the financial feasibility sec-tion on page 16.)

The buildings in total could also house approxi-mately 50,000 square feet of artist workspace(approximately 500–1000 square feet each),while the middle tiers could house 350,000square feet of mixed-used production andassembly space for jobs in the fashion and gar-ment industry, sound production, set designers,and other industries that require large, openspaces. These floors could include shared

space, rotating with demand. The budding fash-ion industry, noted one insider, needs space forlarge (60 yards in length) cutting tables, whichdesigners could use on an as-needed basis.These spaces may attract firms that are ready totake the next step and move out of operationsin their homes or storefronts.

The premier top floors of the four buildingscould comprise professional office space(another 350,000 square feet in total) for archi-tects, engineers, and other design professionals.

Attached to the northern half of the WesternShade Cloth building (2141 S. Jefferson St.) is anannex without landmark designation, which thepanel recommends be converted or rebuilt toinclude a much-needed “black box” multi-usespace for performances, such as film screeningsand theater. Part of the space could also beused for additional parking (see page 17 formore on parking). This flex space could also beused by the surrounding communities for youthtraining and education programs, family wed-dings, banquets, and other life events.

Work-Live SpaceAfter discussing the prospects with local resi-dents, the building owners, and others, thepanel decided against recommending artistwork-live space in the buildings. Financially, itwas deemed infeasible, and it could create con-flicts with the industrial nature of firms and pro-fessional office space that would be attracted tothe buildings. Although the panel did not rec-ommend work-live spaces in the district, it didencourage such development in adjacent neigh-borhoods beyond the PMD, which could com-plement the established arts areas in EastPilsen.

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The back section of the otherwise landmarked Western ShadeCloth building (seen in the distance). The panel saw potentialfor this space, including much-needed parking, large publicgatherings, or multi-use space for the creative industries.

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IS IT FEASIBLE? THE FINANCIALS

DemandFilling 800,000 square feet of mostly vacantspaces in the four buildings is no easy task.However, interviews with brokers and prospec-tive tenants suggested the demand exists. Asnoted previously, arts-related businesses in thearea contribute $1 billion annually to the localChicago economy.

Currently, however, the creative industries arescattered in neighborhoods throughout city,including downtown, making it difficult to estab-lish conducive synergies, generate media cover-age, or brand Chicago’s creative industries iden-tity locally and worldwide. A critical mass of cre-ative activity in one district could foster this syn-ergy and stimulate additional demand.

Income and CostsAll four of the buildings likely require consider-able renovation or improvement and almost acomplete mechanical overhaul. Therefore, thekey question is whether the rents can justify ren-ovation and other costs. Based on the plannedtenant mix and current market comparables forrents in nearby neighborhoods such as theSouth and West Loop, as well as input from realestate professionals, the panel estimated adeveloper could finance approximately $66 mil-lion to fund the project, including a 10 percentreturn.

Rents on the premium top floors, for example,could command $13 per square foot. (All figuresare based on very conservative estimates, andrents are “triple net,” meaning the tenant paysutilities, property taxes, and other expenses.)Retail could pay $12 per square foot, lower thannearby comparable rates but compensating forthe risks of locating in a new development with-

out a retail cluster. Rents for the mid-floors,which the panel based on rates for similarspaces in loft buildings, could be priced at $5.50per square foot. The lowest-cost units would bethe artists’ work spaces on the lower floors.These smaller units could lease for approximate-ly $1.50 a square foot. This would maintainaffordability while also being competitive withnearby, similar rentals, and such pricing couldprovide opportunities for local artists and busi-nesses who need a small space in the earlyphases starting up their businesses.

With these figures, effective gross incomeacross the four buildings would total $14 persquare foot, or $11.2 million per year. Operatingexpenses and property taxes would lower this to$6.6 million.

As outlined in Table 3, the panelists estimateddevelopment and carrying costs totaling $103million, leaving a gap of $37 million. The projectcosts include the estimated costs of buildings

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Estimated Financials at a Glance

Development costs1 $103 million

Potential rentable income/Developer ability to pay: $66 million

Gap ($37 million)

Financial assistance

TIF $20 million

Historic Tax Credit $9.6 million

State grants $5.0 million

New Market Tax Credits $1.0 million

Unfunded gap ($1.5 million)1 assumes developer site acquisition

Table 2. Pro Forma for Spice Barrel Development

MIX (%) AREA RENT TOTAL ($ MILLIONS)

Square Feet (SF) Per Square Foot

Rent

Creative industry 44 350,000 $5.50 1,925,000

Creative industry, small 6 50,000 1.50 75,000

Creative office 44 350,000 13.00 4,550,000

Retail 6 50,000 12.00 600,000

Potential Rental Income 100 800,000 8.94 7,150,000

$ per sf

Potential Rental Income $9.00 (rounded up) $7,150,000

Reimbursements 6.00 4,664,000

Vacancy (1.00) (590,700)

Effective gross income $14.00 11,223,300

Property tax (2.00) (1,864,000)

Operating expenses (4.00) (2,800,000)

Net Operating Income $8.00 6,600,000

Required developer return 10% 10%

Developer Ability To Pay $82 $66,000,000

Table 3. Project Costs

Developer Ability to Pay $66,000,000

Development Budget

Land/building cost $30 24,000,000

Renovation hard cost 55 44,000,000

Contingency (15%) 8 6,600,000

Renovation soft cost 35 28,000,000

Total building cost 128 102,600,000

Land improvement — parking 525,000

Total Project Cost $103,125,000

Profit (Gap) (37,100,000)

Table 4. Available Financial Assistance to Cover Gap

Tax increment financing assistancea $20,000,000

Historic Tax Creditb 9,600,000

State grant 5,000,000

New Market Tax Creditsc 1,000,000

Total Incentives $35,600,000

Profit (Gap) (37,100,000)

Coverage/(Unfunded Gap) ($1,500,000)

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a. Tax increment financing (TIF) assumes ability to draw from existing TIF district at standard percentage of total qualifying costs (i.e., acqui-sition). Equalized assessed valuation (EAV) not available.

b. Assumes hard cost, $5 soft costs, 20% qualifying costs, and 90% applicability.

c. Assumes site is a qualifying location for New Market Tax Credits (NMTC). Assumes interest rates below market by 50 basis points (bps).

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and land. There are several different scenariosin which development could take place. Existingowners of the buildings may decide to renovatetheir buildings (and some are already in theprocess of doing so), some of the owners maychoose to sell to new development interests, orthe city may choose to issue an RFP to develop-ers. Under all of these scenarios, there are actu-al land and building costs, although the pricemay vary significantly from these assumptions.These differences would impact the total projectcost and return on investment.

Several tax credits and grants, detailed in Table4, may be available to narrow any gap betweenproject costs and the developer’s ability to paybased on anticipated rental income. TaxIncrement Financing (TIF) might be used tocover an estimated $20 million of the gap; his-toric tax credits could cover another $9.6 mil-lion; state grants (such as energy, green build-ing, and jobs-related public benefits) couldcover $5 million; and a New Markets Tax Credit(NMTC) could cover approximately $1 million,leaving all but $1.5 million unfunded, a gap thepanelists believed could be closed with furtheranalysis.

ParkingAlthough transit connections should beenhanced, many of the tenants working in thedistrict (as well as visitors) will need access to acar. The district, the panel estimated, wouldeventually need approximately 700 parkingspaces to support the creative industries andvisitors. This was based on a ratio of one carper 1,000 square feet. As is, the six-acre areacould generate 400 spaces with some modifica-tions of site and street design. The space northof the Wendnagle building could accommodate200 spaces, another 180 spaces could be located east of the Hoyt buildings, and 100

spaces are available on the street. This leaves ashortfall of 300 spaces, although the panelbelieved 400 spaces would be sufficient in theearly stages of the proposed project. The build-ings are not likely to be fully rented, and not alltenants would be onsite at the same time eachday. However, more parking would be requiredeventually to attract the full range of uses andtenants.

The site tour also included the building interiors. While some upgrades have hap-pened, the buildings need substantial work before occupation. The “right” tenantmix is key to support such a mix and make the rents justify the renovation costs.

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An illustration of the proposed improvements for the Spice Barrel Creative Industries District. The panel recommended a variety of reuses for the fourbuildings, surrounding public spaces, and streets to create a district that is both functional for the creative industries and offers a distinct sense of place.

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RECOMMENDATIONS FORIMPLEMENTING THE SPICE BARRELCREATIVE INDUSTRIES DISTRICT

The panel offered the following recommenda-tions for discussion by community membersand other stakeholders.

Management and VisionThe city should establish a local entity for thedistrict (e.g., the “Spice Barrel District Council”)to build capacity for the district, spearheaddevelopment, and possibly design aspects ofthe programming and maintenance of the dis-trict. The council would:

• be composed of building owners andcommunity and creative industries stake-holders;

• refine the development plan with addi-tional stakeholder input;

• reinstate the trolley service along CermakRoad between Chinatown and Pilsen (toconnect people to the CTA Red Line inChinatown, Orange Line in Bridgeport, andPink Line in Pilsen);

• integrate the district into nearby neigh-borhood plans, including Pilsen: A Centerfor Mexican Life Quality-of-Life Plan; and

• develop a long-term management planfor the district that could cover everythingfrom improved security and sanitation toprogramming indoor activities and out-door public spaces with activities through-out the year.

Ownership and DevelopmentWorking with owners, and with input from thecommunity and creative industries, the citycould spur redevelopment by:

• negotiating a planned development thatwould permit additional job-generatinguses in the historic district of the PMD (asoutlined above) to ensure owners canattract a variety of bankable tenants;

• working with each owner to consider theuse of TIF for building improvements inline with the final design and tenant mixrecommendations; and, if necessary,

• considering the issuance of an RFP fordevelopers that would be restricted to the uses designated in the developmentagreement.

Design and Planning The city should take responsibility for the follow-ing actions:

• complete right-of-way and parkingimprovements (with streetscape amenities,including lighting, banners, and other sig-nage in multiple languages, representingthe area’s cultural diversity) to make thearea inviting and walkable and create a dis-trict identity;

• provide way-finding signage from nearbyroadways, including the Dan Ryan andStevenson expressways and Lake ShoreDrive, and in Chinatown and Pilsen, todirect visitors to the district;

• improve the public space at the intersec-tion of Lumber Street, Jefferson Street, andCermak Road;

• improve the frontage of the south branchof the Chicago River, including environ-mental mitigation (if necessary), a river-walk, and docks for water taxi stops;

• create a community park on the easternbank of the Chicago River at Cermak Road,opposite the Hoyt building, with a contem-porary arts motif, to serve as an extensionof the creative industries, tie the four build-

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ings together, and create public access tothe river;

• create a single point of responsibilitywithin city government for the ‘Spice Barrel‘development for owners, developers, andcommunity members; and

• consider rezoning of the C-3 parcel to thenorth of the Western Shade Cloth building,which sits outside the PMD, to allow forartist work-live development.

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The Spice Barrel District has enormous poten-tial to revive an important historic and industrialsector of Chicago and restore a source ofemployment and innovation for the city andimmediate communities. As TAP membersunderscored in their final presentation to com-munity members on August 15, 2007, the area ispositioned to draw an entire region to a destina-tion focused on creativity — and be inspired byand contribute to the rich diversity surroundingit. ‘Spice Barrel’ has the added benefit of creat-ing opportunities for local youth to experiencethe creative industries.

At the August 15 public meeting, more than 75people representing Chicago’s creative indus-tries and the Pilsen and Chinatown communi-ties expressed enthusiasm for the proposal andoffered some cogent comments and input.David Betlejewski, executive director of theEighteenth Street Development Corporation,spoke for many when he said he had initiallyviewed this prospect with a healthy dose ofskepticism. He said, however, “the panel hasdone a wonderful job and provided an excitingopportunity to bring two communities togetherand create jobs. They’ve given us a blueprint

SPICE BARREL: CREATIVITY, COMMERCE, COMMUNITY, AND CONVERGENCE

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as a jumping off point to begin to make this areality.”

The community meeting was just the beginningof the process of unfolding and developing theproposal. As Julia Stasch, chair of the TAP said,“when an idea is forged in the dynamic of com-munity input, it always gets better.”

With the confluence of river and roads, and ofdiverse cultures in the surrounding communi-ties, ‘Spice Barrel’ has a distinctive potential tobecome a node of shared public space betweenneighborhoods. By fostering the creative indus-tries, the district can encourage collaborationbetween arts disciplines, provide affordableworkspace, and create a destination for creativeproduction and presentation. Most importantly,‘Spice Barrel’ can spark commerce and createjobs.

The Spice Barrel Creative Industries Districtoffers a constructive way to think about growthand revival in a city that is growing and chang-ing almost as rapidly as when these four build-ings were first built. The proposed plan is, how-ever, only that — a proposal. The communityand other stakeholders are the final arbiters ofthe creative reuse of this historically significantparcel of land.

As Ald. Solis stated, “It is important for the cityto guide policy that will support a sustainablearts district. In the past, artists have had to relo-cate due to rising property values. The beauty ofthis plan is that these historic buildings will bededicated to uses that complement the charac-ter of the buildings. At the same time, the build-ings will remain for purposes focused aroundproduction, due to the nature of the PMD. Thelocation of this district, nestled between theChinatown and Pilsen, makes it a prime locationto tie together arts, industry and culture.”

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Urban Land Institute Chicago1700 West Irving Park RoadSuite 208Chicago, IL 60613Phone: 773-549-4972Fax: 773-472-3076www.chicago.uli.org

Campaign for Sensible Growth25 East Washington Street Suite 1600Chicago, IL 60602Phone: 312-922-5616 Fax: 312-922-5619www.growingsensibly.org

JULIA STASCH

CHAIRVice PresidentProgram on Human andCommunity DevelopmentThe John D. and Catherine T.MacArthur FoundationChicago

KAREN ALSCHULERPrincipal, Director of Planning &Urban DesignSMWMSan Francisco

MARIA BOTELLOProject ManagerMACONDO CorporationArchitects & PlannersChicago

GLORIA CASTILLOPresidentChicago United Chicago

ANDY EICHHORNVice PresidentMota Construction Co., Inc.Chicago

ALFREDO MELESIONeighborhood Services DirectorCity of Joliet, Ill.

JOHN OHARENKOSenior Vice PresidentCapmark Finance, Inc.Chicago

ERIC SALCIDOProject ManagerPrimestor DevelopmentChicago

KRISTINA SHIHSenior Associate, InvestmentResearchHeitmanChicago

CHUCK THUROWExecutive DirectorHyde Park Art CenterChicago

WILL TIPPENSSenior Project Manager,Planning and DevelopmentRelated MidwestChicago

THE HON. DANIEL S. SOLISCity of ChicagoAlderman, 25th Ward

SAMUEL ASSEFADeputy CommissionerCity of Chicago, Dept. ofPlanning & Development

DAVID BETLEJEWSKIExecutive DirectorEighteenth Street DevelopmentCorporation

MARY BONOMEDeputy CommissionerCity of Chicago, Dept. ofPlanning & Development

JULIE BURROSDirector of Cultural PlanningCity of Chicago, Dept. of CulturalAffairs

ERIK GLASSProject ManagerCity of Chicago, Dept. ofPlanning & Development

BRIAN GOEKENDeputy Commissioner,Landmarks DivisionCity of Chicago, Dept. ofPlanning & Development

BARBARA KOENENDirector, Chicago ArtistsResourceCity of Chicago, Dept. of CulturalAffairs

RAUL RAYMUNDOExecutive DirectorThe Resurrection Project

TIMOTHY SAMUELSONCultural HistorianCity of Chicago, Dept. of CulturalAffairs

HEIDI SPERRYSenior Architectural Historian,Landmarks DivisionCity of Chicago, Dept. ofPlanning & Development

STEPHEN STULTSCity of Chicago, 25th Ward

BARBARA RAYHiredpen, inc.Chicago

MICHAEL DAVIDSONManagerCampaign for Sensible GrowthChicago

SCOTT GOLDSTEINPrincipalTeska AssociatesEvanston, Ill.Chair, ULI Chicago Public Policy

CYNTHIA A. MCSHERRYDistrict Council CoordinatorULI Chicago

ULI CHICAGO AND CAMPAIGN FOR SENSIBLEGROWTH PANEL MEMBERS

CITY AND COMMUNITY REPRESENTATIVES

REPORT WRITTEN BY ULI AND CAMPAIGN FOR SENSIBLE GROWTHPARTICIPANTS