Office Conversion Ahead For 401 S. State Street In Chicago

A new chapter is opening for one of the Loop’s oldest landmarks. A venture led by Marc Calabria, a Bloomingdale-based businessman already involved in one of Chicago’s largest office-to-apartment redevelopments, has acquired the vacant eight-story building at 401 S. State Street for $4.2 million, according to Cook County records and CoStar data.

A Building with Deep Chicago Roots

Designed by legendary architect William Le Baron Jenney, who is often credited as the “father of the skyscraper,” the 1891 structure first opened its doors as a Siegel, Cooper & Co. department store before becoming a long-time Sears, Roebuck & Co. flagship. The building later served as the downtown home of Robert Morris University, which occupied the entire property until merging with Roosevelt University in 2020.

After the university’s departure, the property fell into financial distress. The lender behind the building’s $47.8 million CMBS loan took ownership more than two years ago, and CWCapital tapped Cushman & Wakefield to auction the building earlier this year. The final sale price, just a tiny fraction of the $68.1 million it fetched in 2016, underscores the steep correction in Chicago’s downtown office market.

For context, 401 S. State sits at the corner of State Street and Ida B. Wells Drive, in the heart of the South Loop business district. Its generous floor plates and full-block footprint make it a prime candidate for redevelopment.

From Office Space to Affordable Housing?

While Calabria and IMC Accounting & Tax have not publicly commented on their plans for 401 S. State, his recent partnership with Primera Group on the Clark Adams Building at 105 W. Adams Street offers a strong clue.

That project, currently backed by nearly $68 million in city financing through Chicago’s LaSalle Street Reimagined Initiative, aims to transform the upper floors of the 41-story Art Deco tower into roughly 400 residential units, with at least 30% reserved as affordable apartments. The mixed-use development will preserve existing ground-floor retail and the Club Quarters Chicago hotel, which operates on the lower levels of the property.

In total, the conversion would bring more than 300,000 square feet of obsolete office space back into productive use. Calabria’s purchase of 401 S. State could represent an extension of that same strategy, adapting historic but underutilized office assets for housing.

Why the Timing Makes Sense

The deal comes as downtown Chicago faces one of the toughest office markets in decades, with vacancy rates hovering above 24%. While traditional office leasing remains sluggish, conversions are emerging as a lifeline for both landlords and the city’s economic base.

For the city, attracting private investors like Calabria is critical. The LaSalle Street Reimagined program was launched specifically to revitalize older office towers that have lost tenants since the pandemic. By encouraging office conversion into apartments, hotels, or mixed-use destinations, the city hopes to restore street-level vibrancy while addressing Chicago’s affordable housing shortage.

A Case Study in Adaptive Reuse

According to city planning documents, the 401 S. State property includes a small mechanical annex and spans nearly a full city block between State Street, Van Buren Street, and Ida B. Wells Drive. The Urban Land Institute and the Chicago Loop Alliance previously studied the site in 2023, exploring scenarios for an apartment conversion, a university athletic center, or other institutional uses.

Architecture firm Perkins & Will and engineering firm TYLin participated in that study, emphasizing the building’s flexible steel-frame structure and open floorplates: key advantages for adaptive reuse.

“The bones of these historic structures were built to last,” said one architect involved in that study. “They can accommodate modern mechanical systems, new layouts, and even vertical expansions that older masonry buildings can’t.”

Such flexibility is why adaptive reuse is increasingly viewed as a viable economic alternative to ground-up construction in urban commercial real estate markets. With interest rates and material costs still high, converting existing office space into housing or mixed-use projects offers a faster, less expensive path to delivering new units.

Lessons from the Clark Adams Building

Calabria’s involvement in the Clark Adams conversion demonstrates how private developers can align with public goals. The project has already received preliminary approval for landmark designation, which could unlock additional tax incentives. Despite pending litigation between developers and neighboring property owners, the initiative continues to advance.

Notably, the unit count at 105 W. Adams has already increased from earlier proposals, reflecting growing demand for downtown housing even as office leasing contracts. That pattern could easily repeat at 401 S. State, especially given the building’s location near Roosevelt University, DePaul’s Loop campus, and Chicago’s central transit hubs.

The Broader Market Signal

For investors, the sale of 401 S. State is another signal that Chicago’s office distress cycle is creating opportunity, particularly for buyers willing to rethink the purpose of aging assets.

The fact that the property sold for just over $4 million, down more than 90% from its last sale, will likely attract other opportunistic buyers hunting for similar deals. That pricing delta reflects not just the decline of downtown office demand but also the new economics of adaptive reuse, where value is created through conversion potential rather than tenant income.

Still, such deals are not without risk. Conversions require substantial capital, construction expertise, and regulatory cooperation. But as interest grows in repositioning Loop landmarks, the city’s push for office-to-residential conversions could reshape downtown real estate dynamics for decades.

A Downtown Reinvented

Whether or not 401 S. State follows the same path as the Clark Adams Building, its sale marks another pivot point in the evolution of the Loop. As office towers trade for fractions of their prior valuations, developers with creative vision and patient capital are stepping in.

To learn more about the state of the office market, reach out to our team of Chicago Commercial Real Estate Agents.