At mid-year, Chicago commercial real estate experts see a forecast that could include higher inflation, the emergence of stagflation, and continued uncertainty. However, the confluence of national and geopolitical events—tariffs and military conflicts—and “same-old, same-old issues” at all levels of government make the sentiment for Chicago’s CRE as unpredictable as the city’s Spring weather.
More than 60% of survey respondents are in “wait and see mode”, neither bullish nor bearish for the remainder of 2025, according to the 2025 Chicago Mid-Year Sentiment Report, produced by the Real Estate Center at DePaul University along with Urban Land Institute, Chicago District Council. Further, the market’s level of passion for investing in most Chicago asset classes is lower in 2025 than it was in 2024.
“There has been a palpable shift in local real estate sentiment,” said Reagan Pratt, Douglas and Cynthia Crocker Endowed Director of DePaul’s Real Estate Center. “Although there is long-term optimism, the near-term sentiment reflects a sort of agnosticism.”
Areas of optimism include multifamily, where Chicago has emerged as a market leader for apartment rent growth and is one of the top markets nationally for proposed conversions of offices to apartments. Data centers have been a bright spot as well. CRE professionals continue to believe in the transformative potential of megaprojects—like reimagining the Loop and expanding the United Center Campus.
Some of the key themes within the 2025 Chicago Mid-Year Sentiment Report include:
· Tariffs Will Have an Impact
· It’s Always the Economy
· Mega Projects for My Kind of Town
· Investing In Chicago: A Mixed Sentiment
· Making My Kind of Plans for My Kind of Town
· Government Policies: Good, Bad or Ugly?
Tariffs Will Have an Impact
Global trade, tariffs and geopolitics are the greatest macro risks to real estate and the economy, as more than 8 of 10 real estate professionals believe the threat/reality of tariffs have at least a moderate level of direct or indirect impact on business transactions. That overwhelming response leads Molly McShane, CEO, The McShane Companies to observe that since Liberation Day, and in advance of pending deadlines, tariffs are literally the only thing anyone talks about anymore.
“From an overall economic standpoint tariffs are bad for everyone,” said Tim Anderson, CEO and Founder, Focus. “They become a tax on the consumer.”
Anderson addressed tariffs’ impact on development and construction by drilling down to examine the financial exposure it creates. Materials may account for +/-40% of costs in typical construction projects. But it’s also necessary to factor in the level of materials coming from overseas and the extent of the tariff. That drill down may show an impact to pricing that ranges from 1.5% to 2.5%.
“Tariffs are a discussion point because of the uncertainty and the shock value that is created when the administration announces tariffs or updates on countries or products,” McShane said. “We’ve dealt with pricing increases and uncertainties before; we know how to handle it. It makes some projects more difficult to pencil.”
It’s Always the Economy
Approximately two-thirds (66%) of survey respondents expect a recession before the end of 2026, yet 51% think inflation will be higher and above 3.0% 12 months from now. One quarter, 25%, believe it could rise above 3.5%.
Dr. Jim Shilling, the George L. Ruff Endowed Chair in the Real Estate Center at DePaul University, however, believes the U.S. economy should be able to avoid a recession in 2025.
“Economies tend to operate more like oil tankers than speedboats—they turn very slowly,” Shilling said. “This is especially true when there is a large amount of momentum in the economy – like low unemployment, moderated inflation, and a lot of consumer spending.”
The confluence of local financial issues and national economic forces aren’t lost on Chicago’s real estate community. The three greatest long-term challenges facing the city of Chicago are all financial in nature as real estate property taxes, pension liabilities and the City budget ranked 1st, 2nd and 3rd among the 10 risks people were asked to score. The results themselves come as no surprise, but the level of concern was elevated, with each of the three ranked at more than 4.5 out of 5.
“There is always a concern with the fiscal situation locally and statewide,” said Emi Adachi, Managing Director and Co-Head of Global Investment Research, Heitman. “Some investors have negative perceptions and legitimate concerns. We need some clarity about where things are going to return to normal, however we define normal,” Adachi said.
Shawn Clark, CEO of CRG, summed up the general sentiment for the economic landscape, in Chicago and nationally, and said, “A year ago, I felt confident we were headed toward a soft landing and multiple Fed rate cuts in 2025. Today, I’m more cautious. There’s real uncertainty about where inflation and long-term rates will settle, especially after the current round of tariff negotiations plays out.”
Investing In Chicago: A Home-Town Focus
Overall, the survey results suggest that macro concerns are stunting some of the green shoots seen previously in the local real estate market. That was demonstrated when participants rated the most desirable Chicago property types, on a scale of 1 to 5, for investing over the next 24 months. None of the 15 segments achieved a score of 4 or 5 (the highest scores). Further, the level of conviction for nearly two thirds of identified sectors was significantly lower in 2025 than in 2024.
To no one’s surprise, downtown and suburban offices were the least desirable from an investment perspective despite the fact that the rating for each was higher in 2025 than in 2024. In an interesting contrast, an extremely tight market for Class A trophy office space downtown may lead to a race among a handful of developers to break ground on a new Class A office tower.
The report also found that more than 73% of professionals said the number of investment opportunities at their pricing levels is either improving or plentiful. Further, more than 77% said equity sources with reasonable return expectations are improving. Even lenders have started to join the party with 71% of people surveyed suggesting that debt pricing that allows for positive leverage is either improving or plentiful.
“Although the landscape is more heavily skewed toward improving than plentiful, the results demonstrate that opportunities, and the availability of debt and equity are relatively in sync,” Pratt said. “It is an extremely encouraging sign when capital markets and property markets are in phase. That makes dealmaking much more likely.”
Making My Kind of Plans for My Kind of Town
Reimagining the Loop (first) and Project 1901, the United Center Campus (second) were chosen as the significant projects having the greatest potential to be the most transformative for Chicago. Other projects on the list included The 78, Lincoln Yards, Bronzeville, and Illinois Quantum Project—all which continue Chicago’s penchant to “make no small plans.”
According to Regina Stilp, Principal, Farpoint Development, there are constant themes and motivation that drive these projects. “They’re all passion projects,” she said. “They’re love letters to the City of Chicago. They’re all beautiful sites with great potential. No one believed they would make a gazillion dollars doing one of the megaprojects.”
“I hope that people never lose sight of the importance of mega projects. They give people something to hope for and dream about,” said Hugh Williams, KWILL. “I don’t think the mega project will ever go away because the mega project is the definition of urbanization.”
Government Policies: Good, Bad or Ugly
The Chicago real estate community’s sense of optimism, to the degree it exists, has little to do with policies emanating from the offices of the Chicago mayor, Illinois governor or U.S. president. Springfield policies are viewed the most positively. More than 20% believe Pritzker’s policies will be beneficial where only 8% think Trump’s policies and 1% believe Johnson’s policies will be beneficial.
Max Meyers, a principal with Anagram Capital, noted the haphazard and random nature of Washington policies. “That’s not a political statement, it’s reality,” he said. “On the positive side, uncertainty and chaos create the opportunity for investors to take advantage of dislocations.”
