T
he Neighborhood Hotel is seeking a partner or buyer for its adaptive reuse project at 801 West Madison, which it purchased in 2022 for $14 million. The property has received entitlements and $17 million in tax credits, making it an attractive opportunity.

    Initially, the plan was to develop a 76-key hotel with 20,000 square feet of retail space on the ground floor. However, the future of this project is uncertain as the owners seek a partner or buyer to take advantage of the entitlements and tax credits already in place.

    The property, a former bank building from the 1910s, has been vacant for some time. The Neighborhood Hotel operates four apartment-style hotels in Chicago and Southwest Michigan, and had planned to open a Gatsby-inspired hotel at this location by 2026. Despite its strong brand, market challenges may be stalling other real estate developments in Chicago.

    Chicago's hotel market is experiencing a mix of recovery and challenges, with high-end hotel projects being proposed in areas like Fulton Market indicating investor confidence. However, sharply rising property tax valuations threaten profitability and investor sentiment, despite some improvements in revenue per available room. The market has not fully recovered from the pandemic, and many hotels continue to face financial pressures.