Hart Passman, Elrod Friedman LLP: Reports issued last month stated that the Chicago Bears in the pursuit of their new stadium are thinking about trying a PILOT (Payment in Lieu of Taxes) financing program so as to not be solely dependent on property taxes. This type of arrangement doesn’t currently exist in Illinois, but if it gets through Springfield, the question would be asked, “Who else should benefit from this type of financing?” It will be worth watching not just for this deal, but for long range development projects in Illinois.
Daniel Brennan, Laurie & Brennan: Believes his firm will see some headwinds in the new year. Also seeing some lien claims popping up as people are not getting paid (and, of note, this trend is not necessarily seasonal).
Lee Utke, Madison Marquette: Starting to see the interest rate increases taking hold and the 1031 buyers are drastically cutting back on their investments. Also seeing the institutional funds they deal with getting more cautious; they want to know what the true expectations are for 2023 vs. 2022. Building in cap rate increases as much as 50 basis points since last month. A lot of the institutional investors are saying, “Let’s put a pause until we see where we are headed.” The arena is still active, but their tenants and buyers are a little less aggressive vs. 6-9 months ago.
Rhea Stephen, CoStar Group: The environment is making everyone hesitant because of what is going on, so sales are down; however, Class B properties and industrial are very prime. The other interesting thing going on is the “months to lease” statistic they track is starting to get shorter.
Lauren Zangl, ECS Midwest: Not a lot happening in the environmental side at this time of the year as it is historically slow. Their firm recently held their annual strategic planning meeting and their focus in the coming year will be working with municipalities as there are more opportunities in that arena.
Alissa Adler, Colliers International: Getting back to the office has been challenging. The pendulum swung too far during the pandemic, but it is slowly coming back. The bigger companies are challenged to require staff to come back in fear of losing employees. The smaller companies are mostly staffed but their offices are in the suburbs. Downtown has been impacted the most and it will take more time to recover vs. the suburbs. Businesses need to reframe how they look at occupancy rates. We were never at 100% (more like 60-65%) prior to the pandemic, so when we measure the return to “normalcy” we must be more realistic. Maybe the new norm will be 50-55 percent. Time will tell.
Jack Fitzpatrick, JLL: In Q4 2022, construction projects delivered was close to 9M square feet in Chicago; and 2022 as a whole, a little over 30M square feet delivered. Chicago is strong so one would suggest that there is a need for development to continue, but now the nuance is to see if all this space will get occupied.
John Masters, Masters Investment Group: Getting funding for a lot of projects outside of Chicago (Texas, the southeast and Florida) is difficult – especially with interest rates at 10-12 percent for new construction. Typically, would have 75% leverage and that is dropping back to 65/70%. The whole market is getting locked. The good news is construction costs are slowly going down and the supply chain challenges are improving.
Stella Kalfas, Mental Health Association of Greater Chicago (MHAGC): MHAGC provides mental health education to schools including the Chicago Public Schools. This past year, they started the “Bridge to Health” initiative where one can go online and make an appointment with a therapist anonymously. They are finding a lot of individuals who will never admit having an illness – especially in the construction industry. All of the programs are supported by corporate sponsors and/or individual donors. They do not get any type of government funding. Their sponsors receive webinars as a benefit to share with their employees.
Amy Johnston, Urban Wellness Counseling: Urban Wellness provides individual therapy, community education, workshops and workplace mental health programs. They are doing a lot of consulting around mental health and leadership and trying to find the best solution to minimize isolation in the workplace by working from home while still managing your family’s well-being. Working on a project in New York with the legal industry that is experiencing some mental health challenges.
Michael Prohov, Tandem Construction Development: Michael wears many hats within his firm from interior design to project/site management. Currently working on a project in the near West Loop. The development team is pulling a lot of levers to work with offsite partners, HUD financing, green reduction work, etc.to keep things moving forward.
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