January 6 will be a major day for REjournals as we celebrate the 20th anniversary of the annual Forecast Chicago summit. And to mark the special occasion, John Augustine, Chief Investment Officer at Huntington National Bank, will be the keynote speaker.
The purpose of Forecast Chicago is to look ahead at what’s to come in the next year, so we caught up with John to briefly discuss some of the key themes and trends in commercial real estate. But to hear more, click here to register for Forecast Chicago to hear John, and over 40 other leaders in the industry, touch on the biggest ideas, highlight the wins of 2021, and offer predictions for next year.
The five biggest trends to watch in 2022…
There are five areas that we look at. One of these is employment trends, and in Chicago, we’re good. And what about office occupancy? That’s something new. So we followed that right before the pandemic, but now once again, it looks like we’re gonna be a little bit hostage to the path of the virus. Number three, we look at home prices in general. Now for our market, when we follow the Case-Shiller home price index, it shows our home prices up 11%. We have rising employment and low interest rates, so that should signal further movement in the housing market next year.
The fourth one’s the hardest one to do, but it’s something more subjective: business attraction. When we look back on this year, we see that we’re yet again the top relocation city in the country, but we have to keep that momentum going and build the momentum back. And then number five is costs; specifically in commercial real estate. Our per square-foot costs are generally lower than the coasts, we’re the third biggest market in the country, and that’s good news. We still have a cost advantage.
The demise of big American cities theme was overblown…
This book is still in the first chapter of how businesses are going to operate on the other side of the great lockdown and the pandemic. And we have one of the more diverse cities in the country to be able to take advantage of changing tastes and changing geographies. So this is something still being written.
We know it’s frustrating to a lot of real estate developers, because everybody’s kind of sitting on their hands a little bit. First off, to see the work from home trend and office occupancy, and how they kind of go back and forth every week. But nevertheless, we’re in the first inning of this, and this is more or less the idea stage. Businesses are looking for ideas. Individuals are looking for ideas. Whoever collaborates and gets the best idea as it connects businesses with individuals is going to be very busy for the next five years.
Flexibility as a broader theme in commercial real estate…
Everyone’s got to get flexible around labor because we’re seeing a huge “substitution phase,” where everybody’s substituting the person for a machine because they can’t find the person right now. But in general, we have the breadth and depth to be able to weather any storms coming at us, such as new variants of the virus. We also have the breadth of geography to take advantage of how business forms and operates on the other side of this. We were coming into this being very successful, bringing new companies into our region, and there’s no reason why we lose that success.
Our other positive sense here is that what’s moved the most this year in public real estate markets has been industrial properties, and we’re king of that space. We’re king of the storage space and we’re king of transportation and logistics space, whether it’s railroads or trucking. So there are reasons to be positive, but understanding it may require a new amount of flexibility that we’ve never had to entertain before — just because the business models are still being written for the other side of this.