Chicago Real Estate Pros Get Gloomier
Bears are all over Chicago real estate — and it’s not just because the city’s NFL team is being solicited by a new suburban government each week as it considers future stadium plans.
Rather, more than 80 percent of Chicago real estate professionals are bearish about the rest of 2023, with the pessimistic outlooks on the local market being driven by perceptions of crime levels, rising interest rates, commercial property distress, uncertainty regarding the direction the city will take under newly elected Mayor Brandon Johnson and a drop in overall transactions.
That’s according to a recent survey by the Real Estate Center at DePaul University and the Urban Land Institute Chicago District Council, that found more than four-fifths of the city’s commercial real estate players have negative expectations for the rest of the year, CoStar reported. That’s up from roughly 65 percent in last year’s mid-year outlook report.
Over 75 percent of respondents believe the economy is in a recession or will be by the end of this year.
But the pain won’t last forever, they’ve asserted. Nearly 46 percent of real estate professionals, including investors, brokers, lenders, academics and others, said they were bullish on the second half of 2023. In addition, 38.6 percent of respondents said they were bullish on next year, compared to 35 percent in last year’s report.
It’s been a tough year so far for the Windy City, particularly in the office realm. The remote work movement, accelerated by the pandemic, was already causing challenges for Loop office landlords as companies vacated or significantly downsized their leases. Meta and Salesforce, for example, began marketing a combined 240,000 square feet that could be subleased by new tenants earlier this year so the tech firms could reign in real estate costs.
In recent months, high interest rates and banking failures have exacerbated problems for landlords, especially with a number of loan maturities coming due. Landlords are often selling their properties at a loss, handing the keys back to the lender or facing foreclosure suits.
Even the multifamily sector, which has performed relatively well, has shown signs of weakness. A handful of properties have recently sold for far less than when they last traded. Miami-based Crescent Heights this month bought a nearly 400-unit apartment tower in Streeterville for $173 million, down from the $240 million the firm paid for the site in 2016.
The real estate community is also wary of Mayor Brandon Johnson, worrying his progressive policies will lead to excessive taxation and hinder development. However, key figures in Chicago’s real estate community later walked back some of their concerns.
There are plenty of projects that could bolster the local real estate scene, though. Google plans to buy and occupy the James R. Thompson Center, which could spur economic growth in the surrounding Loop area. And Bally’s is also bringing the first casino complex to Chicago, while Chan-Zuckerberg Initiative made a $250 million commitment to a life sciences research hub, with plans to set up an office in Fulton Market.
— Quinn Donoghue
