The Bears are all over Chicago real estate — and not just because the city’s NFL teams are solicited weekly by new suburban governments as they consider plans for future stadiums.
Conversely, more than 80 percent of Chicago real estate professionals are pessimistic for the rest of 2023, with a pessimistic outlook for the local market driven by factors such as crime levels, rising interest rates, struggling commercial real estate and uncertainty about the direction of the city. Under newly elected Mayor Brandon Johnson, overall transaction volumes are down.
More than four-fifths of urban commercial real estate participants have negative expectations for the remainder of the year, according to a recent survey by CoStar DePaul University Real Estate Center and the Urban Land Institute of the Chicago Area Council. report. That’s up from about 65 percent in last year’s midyear outlook report.
More than 75% of respondents believe the economy is in recession or will be in recession by the end of this year.
But they assert that the pain will not last forever. Nearly 46% of real estate professionals (including investors, brokers, lenders, academics, etc.) are bullish on the second half of 2023. In addition, 38.6% of respondents said they are optimistic about next year, compared with 35% in 2023. last year’s report.
It’s been a rough year so far for the Windy City, especially in the office space. The remote-working movement accelerated by the pandemic has created challenges for Loop office landlords as companies vacate or slash leases. For example, Meta and Salesforce earlier this year began marketing a combined 240,000 square feet of land that can be subleased by new tenants so tech companies can keep real estate costs in check.
High interest rates and bank failures have exacerbated problems for landlords in recent months, especially as many loans come due. Landlords often sell properties at a loss, return the keys to lenders, or face foreclosure lawsuits.
Even the relatively well-performing multifamily sector is showing signs of weakness. Some properties have recently sold for well below what they were last traded for. Miami-based Crescent Heights bought a nearly 400-unit apartment building in Streeterville this month 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, fearing his progressive policies will lead to excessive taxation and hinder development. However, key figures in Chicago’s real estate world have since walked back some of their concerns.
Still, there are plenty of projects that could boost the local real estate sector. Google’s plan to buy and occupy the James R. Thompson Center could spur economic growth in the surrounding Loop area. Bally’s is also bringing its first casino complex to Chicago, while the Chan-Zuckerberg Initiative has committed to a $250 million life sciences research center and plans to open an office in the Fulton Market.
— Quinn Donoghue
