Working-class people suffered greatly from the fire. The well-to-do, who lived in the south part of the "Loop" along Wabash and Michigan Avenues, were less affected. Those who had already made the move to the Prairie Avenue district were untouched. The city council quickly took control of the rebuilding process. It forbade the construction of wooden buildings in the burned-out district; this had been the basic type of housing for the poor and the working class. The new law permitted only brick or stone buildings in and adjacent to the downtown area. Therefore, workers and their families had to move to outlying industrial districts, like Bridgeport and West Town, in order to find cheaper rents in frame buildings. The O'Leary family, for instance, moved to Canaryville, just east of the Union Stock Yard.

A new central business district grew out of the ashes of October 1871. Within a very short time the downtown area was even more impressive than it had been before the tragedy. In one sense, the Chicago Fire can be thought of as a massive unintended urban renewal project. The old city was gone, and in its place stood a new one. Van Osdel and other architects quickly got involved in the reconstruction of buildings which they had originally designed. Over twenty cast-iron fronts reappeared on Lake Street, still a busy retail district. The Page Brothers' building, which stands today at the southeast corner of State and Lake Streets, is typical of the construction of this period. Standing five stories high, the structure included a steam elevator. Van Osdel's original design for this building had the cast-iron front on Lake Street, though it also had a small storefront on State. The construction of principal facades along Lake Street changed, however, as State Street grew in importance and surpassed Lake in the 1870s as Chicago's principal thoroughfare.

State Street's preeminence as a retail business district did not occur overnight. The Chicago entrepreneur and real estate developer Potter Palmer played a crucial role in the development of State Street. Palmer had made a fortune in cotton speculation during the Civil War, and when the fighting ended, he turned his attention to real estate. In 1867 he purchased three-quarters of a mile of property on State Street south of Lake. Most of the buildings on this property had been wooden. The developer knocked down the shacks at State and Monroe and built the fabulous Palmer House. He also convinced Field, Leiter and Company to move its wholesale dry goods and retail store from Lake Street to State Street. This major company, now on the northeast corner of State and Washington, provided the commercial anchor Palmer needed for continued development. Other retail stores soon replaced the small buildings that had contained livery stables, saloons, laundries, and working-class housing on the new State Street. The first Palmer House, designed by John Van Osdel, opened on September 26, 1870. Within ten years State Street had become the center of Chicago's retail business.

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