CHICAGO—The Chicago region's commercial real estate investment market slowed during the first half of 2016 following an extremely active 2015, according to a new study on investment trends by Avison Young.  Overall investment sales fell 21% to $8 billion as the number of properties trading hands within the office, industrial and multi-residential sectors decreased. Still, experts say investor appetite remains strong, and expect that activity will increase throughout the remainder of 2016, especially in the industrial sector.  

“Chicago is obviously one of the major industrial markets in the country,” Erik Foster, Avison Young principal and practice leader for its national industrial capital markets group, tells GlobeSt.com. “And considering that vacancy rates are at historic lows, with tenant demand still very strong, it follows that investor demand will remain strong as well.”

Industrial investment activity reported a slight decline when compared with mid-year 2015. Transactional volume dropped 19% year-over-year to $1.5 billion, partly due to a 33% decline in the number of properties sold.

But new and foreign capital has continued pouring into the Chicago region's industrial product. Both GLP and Hackman Capital have made significant purchases throughout 2016. In September, for example, GLP agreed to acquire a $1.1-billion US logistics portfolio from Hillwood Development Co. LLC, a portion of which is located in the metro region.

After a record-breaking 2015 filled with several high-priced transactions, office investment activity also slowed in the first half of 2016. Investment volume totaled $2.4 billion – down from the $5 billion recorded in the same period in 2015. But the Loop and its surrounding neighborhoods continued to attract institutional investors seeking core class A product. American Realty Advisors purchased the recently completed 1K Fulton, a 531,190 square foot class A creative office building located in the popular River West submarket, for $303.6 million. Google occupies much of the space.

Retail investment sales recorded the largest year-over-year increase in transactional volume – up 36% to $2.2 billion – prompting cap rates to fall 40 bps to 6.1%. Investors continued to prefer well-leased properties in key city and suburban submarkets. Investors continue to favor grocery-anchored properties. River East Center, a 251,000 square foot lifestyle center located within the CBD, traded for $93.9 million to a joint-venture between Madison Capital and Wheelock Street Capital.

Chicago's residential market continued to see an influx of new development. Sales totaled $1.9 billion – up from $1.7 billion in the first half of 2015. Much of the recent sales activity was centered around the CBD and surrounding city submarkets where higher-income population growth is occurring.  

That migration into the urban core is transforming the way investors look at every sector, says Foster, even industrial. “It continues to cause infill markets such as Pilsen, I-55, McCook, and O'Hare to be much more desirous due to their proximity to the city. It's causing a lot of people to rethink their real estate investments.”

CHICAGO—The Chicago region's commercial real estate investment market slowed during the first half of 2016 following an extremely active 2015, according to a new study on investment trends by Avison Young.  Overall investment sales fell 21% to $8 billion as the number of properties trading hands within the office, industrial and multi-residential sectors decreased. Still, experts say investor appetite remains strong, and expect that activity will increase throughout the remainder of 2016, especially in the industrial sector.  

“Chicago is obviously one of the major industrial markets in the country,” Erik Foster, Avison Young principal and practice leader for its national industrial capital markets group, tells GlobeSt.com. “And considering that vacancy rates are at historic lows, with tenant demand still very strong, it follows that investor demand will remain strong as well.”

Industrial investment activity reported a slight decline when compared with mid-year 2015. Transactional volume dropped 19% year-over-year to $1.5 billion, partly due to a 33% decline in the number of properties sold.

But new and foreign capital has continued pouring into the Chicago region's industrial product. Both GLP and Hackman Capital have made significant purchases throughout 2016. In September, for example, GLP agreed to acquire a $1.1-billion US logistics portfolio from Hillwood Development Co. LLC, a portion of which is located in the metro region.

After a record-breaking 2015 filled with several high-priced transactions, office investment activity also slowed in the first half of 2016. Investment volume totaled $2.4 billion – down from the $5 billion recorded in the same period in 2015. But the Loop and its surrounding neighborhoods continued to attract institutional investors seeking core class A product. American Realty Advisors purchased the recently completed 1K Fulton, a 531,190 square foot class A creative office building located in the popular River West submarket, for $303.6 million. Google occupies much of the space.

Retail investment sales recorded the largest year-over-year increase in transactional volume – up 36% to $2.2 billion – prompting cap rates to fall 40 bps to 6.1%. Investors continued to prefer well-leased properties in key city and suburban submarkets. Investors continue to favor grocery-anchored properties. River East Center, a 251,000 square foot lifestyle center located within the CBD, traded for $93.9 million to a joint-venture between Madison Capital and Wheelock Street Capital.

Chicago's residential market continued to see an influx of new development. Sales totaled $1.9 billion – up from $1.7 billion in the first half of 2015. Much of the recent sales activity was centered around the CBD and surrounding city submarkets where higher-income population growth is occurring.  

That migration into the urban core is transforming the way investors look at every sector, says Foster, even industrial. “It continues to cause infill markets such as Pilsen, I-55, McCook, and O'Hare to be much more desirous due to their proximity to the city. It's causing a lot of people to rethink their real estate investments.”