CHICAGO—To many people, the holidays and the end of the year mean parties to attend and gifts to buy. And for those involved in commercial real estate, it also means evaluating the deals completed in the last 12 months and what to expect in the coming year. In the past few holiday seasons, the look ahead was typically hopeful but not without worries that the developing recovery could still derail. This year, however, on the heels of solid jobs reports and other good economic news, confidence has increased. Brian Tader, who is the current president of Lee & Associates of Illinois, took some time with GlobeSt.com to answer a few questions about commercial real estate in the Chicago area and where it might be heading in the New Year. His office is part of Lee's Midwest network that includes Indiana, Kansas, Michigan, Missouri, Ohio and Wisconsin.
-Coming to the end of 2014, how do you see CRE in the Chicago area shaking out?
I think it has been a really good year for just about everyone involved in commercial real estate. We are seeing sustained rental rate growth through just about every submarket, which is making the owners happy. The lease and sales transaction volume has been at levels the last few years that are reminiscent of 2006 or 2007, so the brokers are happy. The demand side of the equation, especially in the industrial sector, is very strong allowing the developers to build again at pre-recession levels. The capital markets are extremely active allowing landlords to sell at some near record numbers. In attending all of the events around town during the holiday season, you saw a lot of smiles. You did not see that a few years ago.
-What areas of the CRE market have surprised you following the recession?
The strength of the capital markets. It has been amazing to me to see the fury in which the institutional investment markets have been placing money in the Chicago area. We are seeing pre-recession prices paid in regards to cap rates and price per foot paid. I would have thought that with some of the losses in real estate that were taken a few years ago it would have been much longer in the process before we saw this much capital available for commercial real estate investment.
-Can we expect any surprises in 2015?
Barring any geo-political crisis that would upend the markets, I don't think so. In talking to the industry participants and even just sitting in our sales meeting, I have not heard anyone talking about a slowdown of any sort in 2015
-How will weather impact CRE?
As a person who was born and raised in Chicago, I have always prided myself on the fact that I can handle winter. Last year got to me, it was miserable. That being said, most people that live in the Midwest know that winter is coming and are ready for it. In regards to last year, according to the data, things did slowdown in the first quarter. Unless you absolutely had to, you probably did not get in a car and look at a bunch of buildings in January and February. Those transactions just got pushed a little further down the line.
-Since Lee & Associates has been in Chicago, what is the biggest change you have seen?
The sophistication and education level of your average broker. Brokers get involved in many things now that just were not asked of them before. Knowing your individual market is not good enough anymore. Expertise in spreadsheet analysis, supply chains, rail service, infrastructure projects, capital markets, trucking costs, TIF's, construction management are all necessary now to let your clients know you are an expert in your field.
-If you could ask a genie for one wish in CRE, what would it be?
For everything to stay the way it is right now.
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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.
