The Real Estate Center at DePaul University has released its midyear perspective report where it reveals survey results from commercial real estate professionals across the Chicago region in order to gain a better understanding on current outlooks and sentiments. Perhaps unsurprisingly, the cohort surveyed feels most positive about the industrial asset class over other, more distressed ones.
Those surveyed for the results have some connection to The Real Estate Center at DePaul University, The Real Estate Investment Association (REIA) or the CoreNet Global | Chicago Chapter, the report indicates, which offers insight into the attitudes and perspectives of the regional CRE market. While parts of the industry are still struggling to fully recover from the pandemic downturn, a majority of those surveyed feel more bullish than not on Chicago area real estate.
When considering the entire Chicago area region as a whole, nearly 36% of those surveyed say they are bullish on Chicago real estate, 25% say that they are neither bullish nor bearish, but instead, optimistic, while 17% said that they are bearish. Another 21% of the group indicated that they weren’t bullish or bearish but instead, remained concerned in their outlook. Generally speaking, more CRE professionals are bullish or optimistic on the industry than they were in the same period last year.
However, when we start looking into specific asset classes and property niches, the results skew much more broadly. When ranking the strength of various asset classes from 1 to 5, where 5 is the strongest, industrial real estate ranked the highest at 4.38. Data centers, which typically falls under the broader industrial asset class, were also viewed favorably at just over 4. However, the weakest segments of the area’s real estate market as dictated by those surveyed were downtown office, hotels and retail malls.
Another interesting look is at policy decisions and local leadership, which had a bit more balanced results. However, of the items listed, the effectiveness of City of Chicago leadership ranked as the top concern. Uncertainty on Cook County property taxes ranked a close second, while the effectiveness of state leadership was the third issue of most concern among those surveyed.
As for industrial, while local CRE professionals believe it is the strongest asset class at the moment, there are still issues to confront related to supply chain issues and volatile pricing of building materials. There’s also still much to be determined in how the future supply chain looks and functions, but Chicago is expected to continue playing an important role in national distribution.
“The pandemic opened our eyes to the challenges of just-in-time delivery,” says Ben Paolone, Executive Vice President, Investments & Capital Markets, Becknell Industrial, who is quoted in the report. “We’re now seeing some users increase the levels of inventory on hand, and thereby creating greater demand for space. Moving forward this is likely to become a more normalized practice.”