CHICAGO—“I try to convince investors that Chicago is a really strong market and will continue to be a strong market,” Bruce Miller, the international director for Jones Lang LaSalle, said on Tuesday at BOMA/Chicago's mid-year Chicago commercial real estate market review, held at the AON Center. Some people consider a glass half-full, others half-empty, but when Miller talks up the Chicago market he acknowledged it's always “beyond 100% full.” But recent indicators have been so strong, he added, that even pessimists cannot fail to see them.
He began by noting that although the flow of high-tech firms, including Google, moving into downtown neighborhoods like River North has been well-documented, “there's a larger trend going on here." Many of the firms moving in are small and not very well-known. But incubators like 1871, Catapult Chicago and others have given many a home where they can go about attracting the younger workers who increasingly reject the suburban office park lifestyle. In addition, the University of Illinois has begun to work collaboratively with the city to help grow the tech market.
“I think the city is finally getting its act together and doing something Boston has been really good at,” Miller said, pointing to the collaboration between that city's many universities and a growing high-tech market.
And lately, the city's real estate market has attracted much greater interest from domestic pension funds and foreign investors, especially those from South Korea and Germany. “Why are some of these groups focused on Chicago when they weren't before?” he asked. One reason seems to be that a building in New York that gets investors a four percent yield would get five or six in Chicago. “That's a huge spread.”
Miller also attributes much of the city's greater visibility among global investors to Mayor Rahm Emanuel and his efforts to promote the downtown market. “We like to call Mayor Emanuel the chief leasing officer of Chicago,” he said.
And investment in Chicago has recovered, if not to the levels seen in the run-up to the recession. In 2006 and 2007, Miller said, the market saw sales of over $5 billion. He presented attendees with a downtown map covered with dots, each one representing sales in those years. “It brings a tear to my eye to see all these dots on the map.” But when he reached the 2009 map, almost all of the dots disappeared. But by 2011 and 2012, the city was seeing roughly $2.7 billion in annual sales. His best guess for 2013 is something on the order of $3 billion in sales. “We continue to see that number go up and up.”
The only thing that can stop it is a dramatic rise in interest rates, he added, emphasizing that he did not think this was likely in the near future. And until that day “we'll see a lot of interest in this market.”
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Brian J. Rogal
Brian J. Rogal is a Chicago-based freelance writer with years of experience as an investigative reporter and editor, most notably at The Chicago Reporter, where he concentrated on housing issues. He also has written extensively on alternative energy and the payments card industry for national trade publications.
