With the recent election of a relatively progressive mayor in Lori Lightfoot, Chicago is poised for dramatic changes. In looking at the effects that her policies will have on commercial real estate, we have to broaden our focus beyond the CBD and out into the neighborhoods.
[This is the second in a two-part series looking at the policies of Chicago’s new administration. Click here to read about efforts to address the city’s affordable housing shortage, and what that may mean for market-rate housing.]
In the wake of the 2008 crash, the Rahm Emanuel administration focused on bringing capital to Chicago to accelerate the city’s economic rebound, especially through high-profile corporate relocations. This March, in fact, Site Selection Magazine ranked Chicago the top metro area for corporate relocation for the sixth straight year.
Still, these efforts were concentrated on the central business district. Chicago, a city of neighborhoods, hasn’t paid as much attention to communities other than those in or adjacent to the CBD. Areas of high poverty in particular have been neglected.
“The reality is, when you are on the far South Side and the West Side, some of those neighborhoods are very bleak. There’s not a lot for young people to do,” Mayor Lightfoot recently said. “There are too many vacant lots and abandoned buildings, and not a lot of commercial activity, nor healthy activities for communities to feel proud of and engage in.”
While we focused on affordable housing in part one of this series, that is only part of the solution. Communities in Chicago that have been devoid of investment relative to the CBD are crying out for more than a safe, affordable and accessible place to live; they need employment opportunities. The tide on this trend has been turning for the last few years, albeit sluggishly.
For example, The Hatchery opened in East Garfield Park last year. The 67,000-square-foot facility applies the incubator model to a unique sector: food research and production. Featuring 56 production-ready kitchens, a large shared kitchen, food storage and other resources, the facility is designed to grow food startups—as well as the surrounding community.
“There’s a lot happening around town right now and some of it may be kind of stealthy because it’s not occurring downtown,” said Kevin Havens, executive vice president, director of design at Wight & Co., the firm that designed The Hatchery. “I’m looking forward to how this all lines up with Mayor Lightfoot’s initiatives.”
The Hatchery is projected to create 900 jobs in its first five years of operation, creating 25 new companies a year. But according to Havens, the impact of The Hatchery on the surrounding area goes beyond job creation.
The food incubator has partnered with the Garfield Park Garden Network, a coalition of 32 growing spaces spanning three acres of land in Garfield Park. Fresh produce from this network of growers is sold at farmers markets with proceeds funding the maintenance and expansion of local gardens and urban farms.
There are also teaching spaces where members of the community can come in for assistance with employment searches or job training. The Hatchery came about through a joint venture of the Industrial Council of Nearwest Chicago and Accion, a nonprofit lending network. Accion operates out of The Hatchery providing small business loans, free business coaching and networking events.
“I think you can effect change with very simple steps,” Havens said. “Not everything has to be on the scale of Lincoln Yards. There can be very simple and individual approaches to building communities.”
When it comes to bringing investment to neighborhoods on the city’s South and West Sides, there’s no better vehicle to drive that capital than Opportunity Zones, according to Charlton Hamer, senior vice president, Habitat Affordable Group at The Habitat Company.
The newly enacted federal program provides a tax shelter in exchange for investment in, and rehabilitation of, impoverished areas. According to Hamer, the Lightfoot campaign should double down on the momentum behind this program and promote those areas of the city that are in the best position to capitalize from new investment.
“Right now there is a tremendous rush of private capital coming into these Qualified Opportunity Zone funds,” Hamer said. “If the city were to market those areas, support these projects and take property they own within these areas and do a land write-down on these deals, it would help incentivize private capital coming into these areas.”
Opportunity Zones can accelerate investment in long-forgotten corners of the city. But according to Jon Morgan, managing principals and co-founder of Interra Realty, there has already been substantial investor concentration on the South and West Sides, at least for workforce housing.
“We’ve seen interest coming in from other states because they are chased out of their own markets with yield,” Morgan said. “Chicago has a lot of good economic factors that a lot of other markets don’t have.”
Fellow co-founder and managing principal of Interra Realty, David Goss, echoed this sentiment. He also has confidence in the new administration’s ability to affect change at the neighborhood level.
“I think the new mayor and her approach to everything has really energized people to have a little bit of optimism,” Goss said. “I think change is good at times and I think she has really presented a good initial impression to a lot of people.”
One of the most pressing issues—among many—facing Chicago is its population loss. The Chicago metro lost an estimated 22,068 residents from 2017 to 2018, according to U.S. Census Bureau data. Unfortunately, the working class comprises a significant part of the population leaving the city.
Though it still remains far more affordable than other metropolitan areas like New York and San Francisco, Chicago is starting to hollow out as those at the far ends of the income spectrum mostly stay in the city and the middle class leaves in droves. This dichotomy of haves and have-nots isn’t just bad optics, it’s bad economics.
“That socioeconomic group—our firemen, our police officers, our teachers and our service sector population—if we lose that population, the city cannot be competitive with others in the region, in the country and globally,” said Hamer.
For the Lightfoot administration, it’s not a matter of focusing on the CBD or spending time bringing investment to the outer neighborhoods; the two are intrinsically linked. Bringing opportunity to all of the city’s residents is the only sure way to safeguard that Chicago remains a competitive economy on the national and global stages.