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In 1884, however, William Le Baron Jenney designed and built the Home Insurance Company building at Dearborn and Washington Streets. It was the world`s first iron-and-steel-framed building, a revolutionary design that gave birth to the skyscraper, allowing urban expansion to go up more easily and practically than out.

With the advent of the skyscraper, the city`s main business district was solidified into one compact square mile between Chicago`s major cable car arteries that became forever known as the Loop.

After that, the fortunes of the Near West Side plummeted. In the early part of this century it was called the Mid-City district. Madison Street, from the South Branch of the Chicago River west to Ashland, became the world`s longest, most populous skid row district. The river end of Madison became a sordid collection of honky tonks and bordellos. At the Ashland end, the exquisite mansions and brownstones became seedy boarding houses, while many of the elegant churches were converted into union halls.

South of Madison, the area around St. Patrick`s sprouted with garment factories and sweat shops, while the area north of Madison flourished as a produce and warehousing center.

Only the Taylor Street Italian district, with its Old World groceries and restaurants, and Greek Town along Halsted Street, with its myriad restaurants and coffee houses, gave relief to the relentless deterioration. At the end of World War II, the middle class exodus to the suburbs began in earnest and the inner city filled up with migrating blacks desperate for housing. It seemed virtually certain that the Greek and Italian neighborhoods were destined for extinction, too.

Through much of this century, nothing much changed for the better on the Near West Side. What change there was, usually was for the worse. Many of its industries and businesses joined the suburban migration, leaving their buildings behind. The grand old row houses surrounding Union Park became the dilapidated tenements of a black slum. Many of them burned down during rioting in 1967 and 1968.

One bright spot appeared in 1941, when the state created the West Side Medical District. It was a move to take advantage of the close proximity of the University of Illinois medical school and hospital to Cook County and Presbyterian Hospitals, all of them threatened by encroaching, crime-ridden slums. Given the power of eminent domain, the medical district board slowly began to build a world-class medical research and health care center, though the slums that surrounded it remained.

Then in 1955 Richard J. Daley was sworn in for his first term as mayor. One of Daley`s first promises was to locate a new, four-year campus of the University of Illinois in the center of the city. Since the late 1940s the university`s board of trustees had been trying to find land in the western suburbs to build a campus to replace a jerry-built two-year school it was operating at Navy Pier.

Daley would not hear of the campus going to the suburbs. He wanted it in Chicago, and he wanted it as close to the Loop as he could get it to buffer the downtown area from the ceaseless deterioration of the inner city. Carefully flexing his political muscle, which in his first term was as yet not too well developed, he convinced the university trustees that the Chicago-area branch of the school would get political backing only if it were located in the city.

Daley`s first, last and only choice for the university site, the vast, unused railroad yards south of the Loop (where the Dearborn Park homes are now located), proved impossible. The mayor couldn`t get the railroads to sell the land cheaply enough.

Several other city sites were suggested, including Garfield Park and Meigs Field, but for various reasons had to be discarded. In the early 1960s Daley, by then desperate to get the school built someplace to accommodate the burgeoning Baby Boom generation of college students, surprised nearly everybody. He announced that the city would make land available for the new university on the Near West Side. Part of the land he offered was a tract the city had already acquired for urban renewal. The remainder, he said, would be acquired by buying up and tearing down a portion of the Little Italy and Greek Town neighborhoods southwest of the junction of the recently opened Eisenhower, Dan Ryan and Northwest (later Kennedy) Expressways.

Residents of the neighborhood bitterly contested Daley`s decision, but the city eventually won out and the university was constructed.

The site was a compromise that really pleased nobody at the time. Residents didn`t want to see half their neighborhood torn down, forcing friends and relatives to move away. The university trustees would have liked more than the 145 acres offered at the site, and they had hoped for a campus in a more traditional, parklike setting, surrounded by a community where the campus faculty and staff could find homes.

For its part, the city had to agree to a campus that, at least for the time being, would be almost exclusively for commuter students and one that would concentrate mainly on undergraduate education. There were to be no dormitories or football fields. The university trustees didn`t want a Chicago campus that would overshadow the home campus in Urbana/Champaign.

For the most part, however, Richard J. Daley got what he wanted. The campus was in the city and accessible through the main commuter routes, making it relatively cheap and easy to get to for Chicago students. It was also adjacent to the Loop, making the campus a buffer between the downtown and the West Side`s growing slums. Daley also hoped that the campus would boost the neighborhood and the medical center less than a mile away.

It has taken many years, but it has happened. Greek Town along Halsted Street has persevered, and the Taylor Street environs still are dominated by the Italian families that settled there before the turn of the century, their restaurants doing better than ever.

In the last 15 years, however, gradual gentrification and new townhouse construction has transformed the residential corridor between the university campus and the medical district. The neighborhood that has been created physically resembles De Paul. In spirit, it is beginning to resemble Hyde Park, with its mixture of university professors and doctors and researchers from the medical district.

In 1974 the gentrification movement leaped north across the Eisenhower Expressway to the 1500 block of Jackson Boulevard. Several investors, led by political consultant Phil Krone, obtained a historic landmark designation for the entire block. At the time the block consisted of 31 crumbling Victorian row houses, the last survivors of Ashland Avenue`s glory days before the turn of the century.

Now nearly totally renovated, the Jackson Boulevard historic district is a breathtaking urban treasure. Standing by itself in a sea of vacant lots, it looks like a delicate, irreplaceable museum piece reconstructed to demonstrate the genteel, upper-class street life of the late 19th Century.

If the residents of the historic district have their way, however, they won`t stand in splendid isolation for long. They would like to see some luxury townhouses constructed on the surrounding vacant lots, priced in the neighborhood of $200,000 a unit. They think there is a ready-made market across the expressway in the medical district, which now employs 50,000 people, many of them highly paid physicians, researchers and administrators.

The area has become so attractive that the gentrification movement has even spread west of the medical district, reaching out nearly to Western Avenue. In March, 1983, an old working-class area called the Tri-Taylor neighborhood was placed on the National Register of Historic Places. That was all the impetus needed for more urban pioneers to move in and begin rehabilitating a mixed Italian/Mexican community of cottages, two-flats and row houses in an area between the medical district, Polk Street and Ogden Avenue.

Though gentrification is often a boon to the city, it is sometimes the bane of a gentrified neighborhood`s longtime residents.

”An ordinary guy who can afford to spend $250 to $300 a month on rent can`t find housing around here anymore,” says Florence Scala, who led the neighborhood revolt when Daley chose the Halsted Street site for the university. ”Gentrification is in some ways becoming a bigger threat to the Italian community than the university ever was. Younger people growing up around here are beginning to move away because they can`t pay the rents for a place of their own. It`s sad to see.”

Despite the gentrification it caused, the university has proven to be a good neighbor since its opening, says Scala. She now operates a restaurant in the Taylor Street storefront her father once used as a drycleaning shop. Many of her customers are from the nearby campus.

”If the gentrification thing doesn`t get too far out of hand,” she says, ”I think the Italian neighborhood will continue to survive. Money is a big lure, but the sense of community is still strong here. There aren`t many neighborhoods in the city like this that are left, with families going back three or four generations in the same house. You have enough families with small children still here, and that is what keeps a neighborhood bound together.”

Though it still doesn`t have a football stadium–or a football team, for that matter–the university is thriving, too. With 25,000 students, it has become a major academic institution that is gradually shifting to a strong emphasis on graduate education.

Perhaps even more significant, last year the university announced plans for the construction of its first dormitories. By the fall of 1987 a new complex of buildings at the corner of Halsted and Harrison Streets will house 1,000 student residents.

It is a development that will change the character of the university, ending its days as an exclusively commuter college. But it will also change the character of the neighborhood. With 1,000 students living in the vicinity, it is virtually certain that there soon will be new bookstores, convenience stores, bars and restaurants catering to them.

The strong presence of the university and the medical district has done more than just stabilize the neighborhoods south of the Eisenhower Expressway. By 1980 the unsavory neighborhoods of vacant lots and old factories north of the expressway were beginning to look downright delicious to imaginative developers.

Part of what made the area north of the Eisenhower so tantalizing was that the downtown business district did something in the early 1960s that was previously unthinkable. It began to enlarge itself, growing beyond the tight, 90-year-old, mile-square constraints of the Loop. Moreover, the first downtown growth outside the Loop rooted itself in the vile Near West Side, and it has gradually been creeping westward towards the university ever since.

The westward movement of the downtown district wasn`t started by a Chicagoan, but by a savvy New York construction tycoon.

Erwin S. Wolfson was a businessman who in some ways thought like a sociologist. In the late 1950s he began to take an interest in the shabby office districts that surrounded New York City`s major commuter railroad stations. Though the neighborhoods were run-down, Wolfson noticed that the office buildings near the stations always enjoyed close to 100 percent occupancy.

Intrigued by the occupancy rates, Wolfson hit upon a phenomenon. He discovered that the managers of the offices around the railroad stations had chosen to locate there because they themselves did not live in the city. They were suburban railroad commuters who usually spent an hour or more each way every day traveling to and from their jobs. They did not like spending another half hour going across Manhattan in the morning to get from the station to their offices. So, despite the shabbiness of the neighborhoods, they chose to rent offices near the railroad stations.

With that discovery in mind, Wolfson became convinced that if he built a quality office tower near a major commuter train station, he would have no trouble attracting top-of-the-line corporate tenants. He acquired air rights over the tracks next door to Grand Central Station and put up the most expensive office building ever built up to that time, the 59-story Pan American Building.

Even before the Pan Am building was completed, Wolfson knew he was on to something. He appeared in Chicago in 1960, where he already owned two Loop buildings, and began studying the areas around Union Station and the North Western Station. In 1961 he acquired the air rights to the tracks leading into Union Station on the west bank of the Chicago River`s south branch and announced he would build modern office towers over the tracks.

Wolfson died in 1962, before construction began in Chicago. The project was picked up by another New York firm, Tishman Realty & Construction, that proved to be equally as innovative as Wolfson.

Robert Belcaster joined Tishman in Chicago as a sales agent when the company took over Wolfson`s railroad property. He is now the managing director of Tishman Speyer Properties Inc., an offshoot of the original company. He remembers vividly the excitement that was caused by building a first-rate office building west of the river.

”Something had begun to change in office construction around 1960,”

Belcaster says. ”Up until then, offices in all the older buildings were rented like residential apartments, except office tenants rented suites that usually contained about 1,000 square feet. If you were a firm that required 5,000 square feet of space, you had to rent five separate suites running straight down a corridor. And usually the tenants couldn`t get the landlords to take the doors off the offices to open up the office flow.

”All of a sudden big companies wanted offices with large, open floor plans because it created quite a few economies in the operation of an office.”

That is precisely the sort of 18-story structure Tishman constructed as its first building over the railroad property at 10 S. Riverside Plaza, along the river between Madison and Monroe Streets. It had as neighbors striptease joints and sleazy skid row gin mills. Across the river, before reaching the Wells Street boundary of the Loop, much of Wacker Drive was a sinkhole of broken-down warehouses.

”Nobody was certain that we could attract the kind of corporate tenants that we needed to fill as large a building as we were putting up,” says Belcaster. ”We were pretty confident that we were not only right but that once others saw what we were doing, there would be a `fill-in` effect between us and the Loop, with other new buildings going up, following our lead.”

That was in 1965. Now Tishman Speyer has four buildings along the river`s west bank, totalling 4.5 million square feet of space, and they enjoy the best office occupancy record in the city. In the intervening years, Wacker Drive has blossomed into one of the most glittering business streets in America, bursting with astonishing new office buildings, including the world`s tallest building, Sears Tower.

”If the idea is right and the time is ripe, things have a way of filling in,” says Belcaster.

West of the Tishman Speyer properties skid row has all but disappeared. The property became too valuable for the city to allow it to exist. As a result, more new buildings are going up farther and farther west of the river, including office towers being built directly on top of both the Union and North Western train stations.