Post-Pandemic Chicago CRE Market Remains Resilient Across All Property Types Says Panel At IREM Chicago Luncheon
By: IREM Chicago Chapter 23
The 15-plus months following the COVID-19 outbreak resulted in positive seismic changes to the industrial and multifamily markets across metropolitan Chicago, while retail properties adapted to significant consumer and tenant preferences and demands. Given the uncertainty brought on by the pandemic, the market is poised to remain robust through the balance of the year.
These perspectives summarize facts and insight shared by a panel of commercial real estate leaders who took part in the IREM Chicago Mid-Year Market Update and Chapter meeting July 14 at the Drake Oak Brook Hotel.
The event – the Chapter’s first in-person gathering since March of 2020 – attracted some 75 members, guests, and Industry Partners. Moderator Danny Nikitas, principal of Avison Young, noted the office market remains relatively stable, with some new properties coming online in the months ahead. The slow return of workers to office buildings, he said, has resulted in “not much of a trend.”
Below are key points presented by the panelists.
Gail Lissner, CRE, SRA, Managing Director at Integra Realty Resources. Following March of 2020, the suburban and city multifamily housing markets went in opposite directions. In the suburbs, occupancy levels for apartments soared to the high 90% levels, even for class C properties. That was not the case in downtown Chicago, where occupancy levels in class A and class B assets were 80% and 83%, respectively – with levels around 70% at some properties. Furthermore, downtown landlords were compelled to offer major rent concessions. “This was astonishing,” Lissner said. “I’ve never seen such a significant rent drop and occupancy decline.” Downtown occupancy has climbed to 91% in first quarter, and Chicago remains more affordable than other major U.S. markets.
Susan Bergdoll, Senior Vice President at Duke Realty. The continued growth of e-commerce has resulted in a continued boom for industrial properties throughout metropolitan Chicago. The vacancy rates at submarkets range from 4% in Chicago and O’Hare to 3.5% in central DuPage County and 2.8% in the west suburbs. This demand has created development of the so-called “spec-to-suit” property, where developers launch a project and within a four to five month timeframe, finish the building according to the tenant’s specification. Another outcome is called “reverse logistics,” where a warehouse tenant maintains a “safety stock” of products that might be in future demand, monopolizing space. Bergdoll summarized the current industrial market this way: “We are all walking around with a swagger.”
Deena Zimmerman, Vice President of SVN. Target, which closed some stores since the outbreak, can be cited as a major retailer that weathered the pandemic better than others. The retail giant learned to operate on “a smaller footprint,” and plans to open more sites in the months to come. Other retailers are reinventing their brands to take advantage of the relaxed restrictions brought on by vaccinations. Online home furniture and décor store Wayfair is seeking a bricks and mortar location in Chicago, and upscale casual retailer Lululemon plans to quadruple its store presence by 2023. “People have been cooped up and want to go out and shop and be entertained,” Zimmerman said. Restaurants that thrived the past year-plus were those that effectively adapted to take-out service, expect more restaurants to operate as “ghost kitchens,” and look out for creative drive-through options in the future.
Prior to the panel discussion, Chapter leadership conducted business and shared news on upcoming events. These 14 IREM Chicago members were installed by 2021 Chapter President Steve Schimmel, CPM®, for earing IREM professional certifications:
Jamie Falconer, CPM®, Foster Premier, Inc.
Elena Jimenez, CPM®, The Missner Group
Margo Lewis, CPM®
Jeremy Lyons, CPM®, Colliers International
Angelica Ponce, CPM®, Invitation Homes
Keith Retterer, CPM®, Colliers International
Kelli Stuart, CPM®, Draper and Kramer
Erin Weber, CPM®
Linda Cooper, ARM®
Michelle Esquivel-Salagado, ARM®, Keller Williams OneChicago
Tara Hoerth, ARM®, Draper and Kramer
Albertas Kerelis, ARM®
Courtney Rosen, ARM®, Draper and Kramer
Isabella Zach, ARM®, Optima Inc.