But rather than build a new hotel, Amli aims to capitalize on a different trend: Making its 297-unit apartment building a residential hybrid that allows short-term rentals.
It’s a move some local landlords have made in recent years to help spread the risk at their properties and find new sources of revenue. While many apartment building owners have shunned tenants leasing units through short-term rental websites like Airbnb for fear of issues with security and transient guests, there’s a growing list of owners embracing them to help keep their buildings full and potentially boost profits.
Now Amli, a well-known apartment developer, wants to do the same as it braces for what could be a deep recession triggered by the coronavirus pandemic.
“There’s been excessive supply (in the apartment market), so any time you can generate demand, praise the lord,” said Amli CEO Greg Mutz, who is seeking the city’s blessing to allow 44 short-term rental units in the Wells Street building. “It’s a really great way to get some units leased.”
The city cracked down on tenants subleasing units to transient guests a few years ago with a shared-housing ordinance that sets a limit of six short-term rentals in big properties and lets building owners put their properties on a list that prohibits them entirely. But apartment landlords can bypass those rules if they get a hotel license and zoning from the city to allow hotel usage. Among the takers downtown: The owner of the 56-story Essex on the Park high-rise near Grant Park leased 92 units to short-term rental startup Sonder, and the owner of One Superior Place in River North won city approval last year to offer as many as 20 percent of its 809 apartments to short-term tenants.
Amli’s plan, meanwhile, comes with the hotel market under siege. Widespread economic shutdowns from the coronavirus outbreak have sapped travel and canceled months of conventions and trade shows at McCormick Place, pushing many downtown hotels to temporarily close. Leisure travel has picked up slightly in recent weeks, but occupancy at downtown hotels that remained open during the first week of July was still just 26 percent, down 61 percent from the similar week in 2019, according to data from hotel research firm STR.
Given the COVID-19 stress in the hotel market, Amli doesn’t have a deal lined up with a short-term rental company at 808 N. Wells, where it broke ground in January, Mutz said. “We just wanted the flexibility to do it at some point if it makes sense,” and its original planned development for the site prohibited short-term rentals. The project, which won City Council approval in early 2019, is slated to be finished by next summer.
Mutz said Amli has signed deals with short-term rental companies at “eight or nine” of its 70 properties and had leased 1.7 percent of all of its units that way at its peak, though that share is now down…