CHICAGO—Residents of the West Loop will hear the sounds of construction all this year and the next, but at least until the market gets on an even stronger footing, it's luxury rentals, and not condos, that will rise over the neighborhood. Yesterday, for example, Chicago-based Ascend Real Estate Group, Chicago-based Team4 Development LLC and Boston-based Intercontinental Real Estate Corp. held the official groundbreaking of The Madison at Racine, a nine-story, 216-unit, luxury apartment building at corner of Madison Street and Racine Avenue. The firms formed a joint venture with the Intercontinental US REIF fund to develop the project.

“You look at where you are in the [business] cycle, and I think it's premature to start doing large condo projects in the West Loop,” says Walter Rebenson, the CEO of Ascend. “There are a handful of new condo deals in the West Loop,” but nothing this size in the immediate area. Prior to the onset of the recession, the site was controlled by another developer that wanted to build about 168 condos, Rebenson adds, but the space ended up in the control of a bank.

“A lot of people lost their homes in the recession and it will take a while for them to get their credit rating back.” And until a critical mass of potential homebuyers does recover, Rebenson thinks building luxury rentals makes more sense, even in the West Loop, one of the city's hottest neighborhoods. Ascend usually considers the possibility of eventually converting their rentals into condos, “but our plan is to keep [The Madison] as rental.”