The “Financialization” of Urban Redevelopment: Implications for Historic Preservation

Abstract:Drawing on a case study of office buildings in Chicago's Loop during the first decade of the twenty-first century, I argue that the growing financialization of real estate often conflicts with the desire of preservationists to keep historic assets occupied, in good repair, and economically viable.Using trend data and interviews with real estate actors, I show how the financial performance standards governing potential acquisitions, renovations, and new development and the introduction of novel financial instruments tend to privilege new construction. A surfeit of new speculative construction relative to employment growth can cannibalize tenants from older stock and make it even harder for historic buildings to reach high return benchmarks. In this environment, older structures may be demolished or converted to alternative uses in order to tighten the market and create more scarcity. Preservationists dealing with older buildings need to pay attention not only to their financing sources and tax breaks but also to the investors and local governments financing the “new build.”