Current State of the Real Estate Market in the Chicago Area

June 28, 2023

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COMMERCIAL AND MULTI-UNIT RESIDENTIAL REAL ESTATE – JUNE 2023 MARKET UPDATE

???????????Recovery of the commercial office sector in the Chicago area has been slow as many firms continue to allow significant work from dispersed locations, resulting in a diminished need for large blocks of office space and an increase in vacancy rates, being reported as approaching 20% in the Chicago Loop.?Lenders also remain leery of lending in an uncertain absorption environment, and some interest rates have risen as a result of concerns over increased investment risks. Several of these former office buildings are being converted to residential uses as the demand for apartments in central business districts remains strong. A 199 unit apartment building in the West Loop was recently reported to have sold for almost $367,000/unit.

Although retail was written off as a sector which would never recover, that doesn’t seem to be the case everywhere, as Wayfair is constructing its first retail store (150,000 square feet) in the former Carson’s site located in the Edens Plaza Shopping Center in Wilmette, and the Old Orchard Shopping Center continues to attract new retail tenants.

Unfortunately, specialty sectors such as multi-plex movie theaters still have not returned to pre-Covid attendance levels.?Many of these properties have closed, while some owners of multiple locations have declared bankruptcy while they try to reorganize to stay in operation.?Of those theaters that are still operating, many remain 25-40% below pre-Covid revenue numbers, although annual revenues have been trending upward as large screens, seat renovations, improved concessions and expedited reservation systems still provide audiences with a superior viewing experience.

? One thing is certain, all sectors go through cycles, and the commercial real estate market will continue to evolve and adjust to recognize current market trends. This too shall pass. Stay tuned!