One of Chicago’s best-known blocks for dining out faces a rare moment of flux in the wake of restaurateur Phil Stefani’s announcement that his Tavern on Rush will soon be leaving its home for nearly a quarter of a century.

Tavern on Rush is set to close at the end of the year when its lease expires, Stefani said. That creates the possibility that a key stretch of Rush Street, one of the country’s top corridors for luxury shopping and dining, could soon be a construction zone.

The pocket of Rush Street facing those changes, between Cedar Street and Bellevue Place, is known for crowds of diners, celebrities and people-watchers.

Tavern on Rush’s building is one of three in a row where redevelopments are planned, bringing big changes to an area that has looked virtually the same for decades.

“It’s the heart of the Gold Coast, and really, it hasn’t changed,” Stefani told CoStar News.

Stefani said he’s open to moving to a nearby location if the opportunity arises, but he acknowledged his current prime location and large outdoor dining area would be difficult to duplicate.

The area along Mariano Park is home to some of the country’s highest grossing independent restaurants, including Tavern on Rush, which Stefani opened with the late Marty Gutilla in 1998.

Tavern on Rush’s longtime home is a two-story building at 1031-1035 N. Rush St., which is owned by towing magnate Fred Barbera and lawyer Jim Banks. Stefani said the landlords declined to renew his lease, saying they plan to open their own restaurant in the space. Banks did not respond to requests to comment, and specifics of the redevelopment plan are unknown.

Along the north side of the Tavern on Rush building, developer L3 Capital plans to demolish the two-story Carmine’s Bar & Lounge building at 1043 N. Rush St., after buying it for $24.6 million in February. Chicago-based L3 plans to build a new two-story building on the site, with shops on the ground floor and a second-floor space leased to Carmine’s.

Just north of the Carmine’s site, Mokena, Illinois-based developer Location Finders International for years has been planning to knock down and replace a vacant, two-story building at 1045-1049 N. State St.

Last summer, the developer gained City Council approval for a zoning amendment that would allow Location Finders to build a five-story building on the site, with ground-floor retail, a three-level restaurant and one residential unit at the top.

Timing of that project also is unclear. Location Finders’ founder, Mike Rose, did not respond to requests for comment.

Stone Real Estate retail broker John Vance describes the short stretch of Rush Street as the “Main and Main” of Chicago’s dining scene, even with the emergence of the Fulton Market district as a top destination for high-revenue restaurants.

Tavern on Rush was No. 85 on Restaurant Business’ 2020 list of the top 100 independent restaurants in the country by revenue, with more than $12.8 million in total sales.

Other nearby businesses on the list included No. 6 Gibsons Bar & Steakhouse with $25.4 million in sales; No. 8 Maple & Ash, $24.8 million; and No. 70 Hugo’s Frog Bar & Fish House, $14.8 million.

Other places to eat and drink nearby include Luxbar, Nico Osteria and a Morton’s steakhouse that is closing when its lease ends at 1050 N. State.

Tavern on Rush has been a place to spot actors, musicians and other celebrities visiting town. Chicago sports figures have been regulars, including Chicago Bulls superstar Michael Jordan who would often smoke cigars outside and a 2010 visit by the entire Chicago Blackhawks hockey team accompanied by the Stanley Cup.

“This is a really significant change for the Gold Coast,” Vance said of Tavern on Rush’s closing. “It was a wildly successful restaurant. There’s danger for both parties. If you’re the tenant, how do you replace that location in the Gold Coast, with all the outdoor seating? On the landlord side, how do you get another operator to come in and say, ‘Yes, from the get-go I can generate $15 million or $20 million in revenue’?"

“The changing of the guard, or whatever’s going to happen with Tavern on Rush, you hope there’s not a hiccup.”

Top restaurants and luxury shops on and around Rush and Oak streets feed off one another, Vance said. Nearby retail has been a bright spot during COVID-19, with Parisian retailers Goyard and Cartier among tenants planning new flagships on Oak.

German investor Union Investment Real Estate paid $120 million for a Chanel-anchored building at 57-65 E. Oak St., the highest-priced retail property sale in the Chicago area last year.

Rush Street restaurants also have stood out during the pandemic by staying open, when many operators throughout the country closed for good.

Carmine’s, part of Rosebud Restaurants, has been at the location since 1985, according to Nick Lombardo, chief operating officer of Chicago-based parent company Rosebud Restaurants.

Demolition of the Carmine’s building is expected to start soon after Tavern on Rush closes, meaning both sites could be construction zones for most of next year.

Carmine’s expects to close for business early next year, Lombardo said, with L3’s demolition and construction project expected to last about 15 months. Carmine’s hopes to reopen in the second quarter of 2024, he said.

The new Carmine’s space will be around 15,000 square feet, Lombardo said, on a lease that with extension options will run for at least 20 years. It will be a larger, more efficient space than the current 11,213-square-foot building on the site, he said.

L3 bought the Carmine’s site from David Marienthal, a descendant of colorful characters from another booming era on Rush Street.

He is related to the late Oscar and George Marienthal, brothers who operated the famous Mister Kelly’s nightclub on the site now occupied by Gibsons in the 1950s and ’60s. Performers there included Barbra Streisand, Duke Ellington, Bette Midler, Richard Pryor, Steve Martin and Lenny Bruce.

The nightclub, which closed in 1975, was featured in a 2021 documentary called “Live at Mister Kelly’s.”

Carmine’s will occupy one of four ground-floor retail spaces in the new structure, closest to the Tavern on Rush building, Lombardo said. It will serve as an entrance and ground-floor bar, with elevators leading to a second level with a large dining area, outdoor terrace, private dining and another bar.

A retractable roof and large sliding windows will allow the entire space to be entirely open-air in warmer months and fully enclosed for Chicago’s harsh winters, Lombardo said.

The restaurant, which serves classic Italian food, steaks and seafood, will move 100 employees to other Rosebud restaurants during construction, Lombardo said. Seating capacity of the new space will be around 500.

“It’s going to be super weird to go by there during construction, but I think in the long term it will be good for the neighborhood,” Lombardo said. “That corner of the Gold Coast is one of the nicest in the city. It’s time to update it for the next generation.”