5/6/21 Chicago Mastermind Group Meeting

Key Take Aways from Chicago’s May 2021 Mastermind Group Meeting!

Gail Lissner, Managing Director, Integra Realty Resources
2021 Commercial Real Estate Trends
• The toughest market to navigate is the office market because of all of the uncertainties
• We are back to 2009 vacancy levels.
• Chicago hasn’t seen the type of appreciation for residential property that other markets have experienced. Nationally, home prices went up 12% but in Chicago only around 8%.
• Multifamily rates in the suburban market increased 2.4%; 6% over the last two years
• Chicago rents experienced declines of 20% year over year and occupancy percentages dropped from the mid-90th percentile to the upper 80th percentile; however that trend is reversing quickly as people get vaccinated and are returning to the office.
• Overall retail in Chicago declined 21%.
• Industrial developments are growing due to the online shopping demands and the need for distribution centers.
• The suburban real estate market is more diverse and the new construction prices range from $1.70/$1.80 a square foot to $.2.25/$2.75 a square foot depending on the model and location.
Roundtable Members/Guests Key Take Aways
• AJ Jacobs: Construction costs continue to rise; lumber is up 200+ percent as well as steel.
• Matt Berry: The equity market remains very tight but are slowly seeing some signs of life.
• Lee Utke: Two new funds were established raising over $4M so there is good availability of equity but significant competition to buy product at a price deemed appropriate.
• Hart Passman: The uncertainty of the office market is still prevalent and has everyone in a great pause that will need to eventually un-pause as soon as it can resolve itself and commercial real estate can develop again.
• Clif Wilson: There is a lot of interest and business has been good in the apartment business.
• John Mackris: Consumer confidence increased from 10 to 15 points from March to April and discretionary spending has increased in the retail world. The return to the office in downtown Chicago for the legal sector increased from 30% to 35% in the last month but overall occupancy 10 points lower.
• Brian McCoy: The life sciences industry will be coming to the Midwest in droves as the rents in the Northeast are too high; and with the Amazons and Walmarts getting bigger, logistics is another big player entering the Chicago area.
• Jeffrey Proeh: Looking for investors who have had real estate for a lot of years but are having issues conducting their 1031 exchange.
• Evan Djikas: – Predicts that although the suburban office has been bad for several years, he is bullish about that market not just due to COVID — COVID was a catalyst.
• Brian Lee: Seeing a lot more design build situations whereby the owners are securing HUD financing since it is more advantageous to the owner than traditional financing.
• Yasamin Enshaeian: Yasamin is a graduate student and although many have told her to stay away from commercial real estate, she is excited to learn more and jump into the market.