It’s a common refrain among commercial real estate professionals today: “Survive until ’25,” meaning do what you can to get through 2024 and expect better times in 2025. But the speakers participating in the State of the Market panel at Illinois Real Estate Journal’s 22nd annual Chicago Forecast had a different outlook.
Their mantra, spoken by panelist Steven Weinstock, senior vice president and regional manager with Marcus & Millichap? “Do more in ’24.”
And what that means is simple: Don’t treat 2024 as a year to endure. Instead, commercial real estate professionals should build the relationships, make the plans and start the projects that will pay off big come 2025 and beyond.
That bit of optimism wasn’t unusual, either. All the panelists speaking during this session predicted that commercial real estate activity in Chicago and its suburbs would increase this year, setting the stage for a brighter future.
Joining Weinstock on the panel were Barry Missner, chief executive officer of The Missner Group; Nick Cannon, group senior vice president with Wintrust Bank; Ralph Zucker, chief executive officer of Inspired by Somerset Development; Scott Kurinsky, executive vice president of BEAR Construction; and Steve Schnur, chief operating officer of CRG. Marcia Owen, partner with law firm Honigman, served as the panel’s moderator.
Here is some of what these industry leaders had to say about the state of the Chicago-area commercial real estate market, today and in the future.
A resilient industrial market
“On the industrial side, we are seeing smaller developments happen. On the leasing end, the activity is good. A lot of smaller tenants are out there seeking space. We are still seeing rents increasing, too. The challenge has been on the sale side and when it comes to developing new projects. It is still a challenge to get projects financed.
“There are opportunities in this market, though. People who take risks will be rewarded.”
- Barry Missner, The Missner Group.
The risks companies need to take
“No one ever got rich by buying T-bills. Generational wealth is built through real estate. Chicago is an attractive market. We have the people, the processes and the resources. The opportunity for growth in Chicago should be attractive to investors. Every cycle puts us in a position to generate new wealth. It’s about taking the risks and taking advantage of the opportunities.”
- Steven Weinstock, Marcus & Millichap
Reason for optimism in the lending market
“I’m still an optimist when it comes to commercial financing. The situation is more nuanced than what you hear, that everything is bad. There are several asset types that are performing well and that are receiving financing today, self-storage, student housing, warehouse and distribution centers. It’s the old ‘meds, beds and sheds,’ healthcare, housing and industrial, that are performing well today.
“When you talk about the challenges in receiving financing, we are looking more at a capital markets problem, not a real estate problem. Office might be the one exception. We can provide financing today, even for spec projects. What we are reserving that for, though, are clients with a long track record and capital stability. That’s who is getting financing for spec projects.”
- Nick Cannon, Wintrust Bank
Happy to be in industrial
“Demand has fallen off some, starting last year. But I am still happy to be in industrial. This market is resilient. Chicago is a bit overbuilt at the moment, but that will change throughout this year. New-construction starts in industrial were down at the end of last year, so some of that excess supply will be filled this year. A lot of users delayed activity in 2023, so I think that 2024 will be a busier year.”
- Steve Schnur, CRG
Boring vs. interesting is the new shift
“There has been a societal shift, a change in the way we go to work. The need to go into the office every day of the week is no longer there. COVID accelerated this shift, which was already happening before 2020. That’s why it is becoming so important to create great places that will encourage people to want to come to work. It’s not about Class-A or Class-B buildings today. It’s about interesting vs. boring buildings.
“We predict that as people are again getting out, they want to return to interesting places. The boring building is out. There is a downsizing happening in the office market. Companies want smaller square footage. But that isn’t the only factor they are considering: The space they take also has to be interesting.”
- Ralph Zucker, Inspired by Somerset Development
Some relief from rising construction costs?
“In the last year, construction prices have normalized. There was less than a 1% overall increase in the price of materials during the last year. That was a relief. We have one of the best labor pools in the world here, too, and the increases in the cost of labor are predictable. They are not a wildcard like what you see with materials costs.
“It’s important to remember that the price of construction is increasing in part because of what we are building. We are building some high-quality projects today. All of those amenities and features we talk about that are necessary today? They are not inexpensive. We are taking on a different type of product than we used to build.”
- Scott Kurinsky, BEAR Construction
Do more in ‘24
“I like ‘Do more in ‘24’ instead of ‘Survive until ’25.’ This is about investing in our city. If we don’t believe in Chicago, then who will? If you don’t believe in Chicago, move somewhere else. I think it’s ‘Do more in ’24 and be rewarded in ’25.”
- Steven Weinstock
“Every crisis creates an opportunity. There are tremendous opportunities in Chicago in 2024. I am optimistic about this year and very excited about 2025.”
- Scott Kurinsky
