Midwest Real Estate News recently spoke with Alissa Adler, principal with Riverwoods, Ill.-based Podolsky Circle/CORFAC International, about the commercial real estate market in the Chicago suburbs. Adler’s take: Real estate activity here is on the rise, and this rise won’t be a short-lived one.
Midwest Real Estate News: Let’s start with a broad question: Are you seeing more commercial real estate deals in the Chicago suburbs today than you were one or two years ago? Alissa Adler: Yes. Definitely. We don’t do anything in Chicago’s CBD, just in the suburban market, so that’s where my viewpoint is coming from. Right now in the suburbs we are seeing more activity. We are actively looking at deals for clients. We manage properties in the suburbs. And we are always on the look-out for acquisition opportunities. I would say that on all fronts activity has picked up.
MWREN: Why do you think this is? Adler: It seems like the confidence is coming back in the market. I see lenders more interested in doing deals. They are more aggressive than they were a year ago at this point. Occupancies are starting to come up as a result of this. Class-A still dominates over Class-B in office. Class-C trails way behind both of them, but we are seeing more movement in office. Industrial is a little stronger than the office sector, but we are still not seeing a ton of spec construction. We are seeing mostly build-to-suits and some redevelopment, some tear-downs.
MWREN: What product types are performing better than others? Adler: Suburban office is widely overlooked. It’s a stronger market than most people give it credit for being. Retail is very hot right now in the suburban market. Apartments are still popular, while industrial has always stayed popular, especially in core product. We think that that the suburban office market is going to come back strong. It’s below the radar right now but that is going to change.
MWREN: Why are you so high on the suburban office market? Adler: We’ve always been in the office sector both on management and leasing, acquisitions and dispositions, so we know this market. Randy (Podolsky, one of the principals of Podolsky Circle) and I both like the product type. We understand this product type so we aren’t as nervous about it as some others might be. I’m also a big fan of ignoring the sweeping statistics you hear. You’ll hear big instructions quote research reports that can really bring a market out of favor. What we like to do is drill down at the building level and look at how does any one asset keep its competitive set. Is there a reason an asset has not historically performed? When we are doing advisory work for our clients, they really count on us to analyze the property, to understand the location and how it fits in the market. We can’t just on big reports that tell you vacancy and absorption globally. The drilling down makes all the difference in the world on how you buy these properties and what you pay for them.
MWREN: What would you say are the positives for companies that set up in the suburbs instead of the city? Adler: If you want to attract young talent straight out of college, the city’s CBD might be a better place for your business. For those companies that have that big labor pool and cubicle environment, the city is attractive. The suburbs are attractive to the people who live in the suburbs, who have their families in the suburbs. They don’t want to deal with the commute to the city or the taxes in the city. There are a lot of advantages to being in the suburbs. A lot of companies seem to group together in the suburbs. It’s nice to have your office near other companies that do the same business that you do. You can share or help each other. There is more of that in the suburbs than in the city. There is also parking. Most who drive to work in the suburbs get free parking. If you work in the city and you need a car – say you need to go to meetings all day long — it gets very expensive. For the employee who goes on the train to the city and sits at a desk all day, it’s not that bad. For me, I’d be in my car all day long trying to get somewhere.
