Limited Inventory in Chicago + Exciting New Projects Under Way
The national trend of low inventory can be seen on a local scale in the Chicago market. New development projects – some of which include leasing opportunities – could help increase available inventory.
"At Associated Bank, we actually have a dedicated for-sale housing group, and we just haven't seen as much demand as we thought we might with that group over the last year or two," said Greg Warsek, Senior Vice President and Illinois Market Manager.
"And, to the extent that we are financing for-sale projects – condos, single family developments, townhomes, especially in-filled developments – they are selling very, very quickly," Warsek said. "A lot of the projects that we have that are delivering in the first two quarters of this year are sold out, so some of that report I think is supply driven. There's just not much out there."
Chicago construction right now? Luxury units.
Much of the new construction in Chicago is luxury rental units, Warsek notes. Those new units will help provide a bit more available inventory on the market.
"I think that's part of it," Warsek said. "There was a big rush to fill that big need, and, as usual, I think the pendulum's going to swing the other way and we're going to deliver a lot of luxury apartment units in downtown Chicago over the next, I would say 12 to 18 months – which I believe will ultimately get absorbed – but I believe there will be some compression in the rates. And a lot of this is all luxury product that's coming on, so I think it's going to create some softness in the market."
New office space too.
There's also new office space on the market, but Warsek isn't sure that's going to do much about the issue at hand.
"I'm not sure if it's going to help it, per se, because there's an awful lot in that submarket already," Warsek said. "(There's) a recently announced 1.3 million-square-foot office building sponsored by John O' Donnell's group Riverside (Investment & Development Company). And he's developing – and soon to be delivering – 150 N. Riverside, which is on the other side of the river. It's a beautiful building. That one's largely preleased, as well as (new 52-story office tower) River Point, and they're going to be delivering to tenants in the first quarter, second quarter of this year. And the question is how much can be absorbed, because there's a number of office buildings in that west corridor right now, that West Loop area. So, I think they're going to be out in the market trying to find some tenants, get some preleasing before they go."
New Projects Transforming Chicago
"There's some really cool projects being done in Chicago," Warsek said. "Frankly, from a lending perspective, they're a lot more interesting and diverse and can really change some of the neighborhoods."
Of particular interest, Warsek notes, are the two development projects in Wrigleyville – one underway at Wrigley itself and one just to the south.
"The reality is between what (Cubs owners) the Ricketts (family) are doing and what this development team is doing just to the south of Wrigley (with the Addison & Clark project) is really going to change that whole area and make it a destination, not just during the baseball season but 12 months a year," Warsek said.
Planned development adjacent to Wrigley includes a plaza, an office building and a hotel.
"The Ricketts are going to do some really neat things around there with that new plaza and with the (Zachary) hotel and the restaurant offerings that are going to be there," Warsek said. "But this (mixed-use) development to the south (a joint venture between M&R Development and Bucksbaum Retail Properties) is going to make it even more of a destination with some of the things they're offering in terms of the ability to live there. There's going to be commercial retail, there's going to be restaurants, there's going to be entertainment. So it's not just the Cubs, it's that whole entire area that you can actually go and stay there, live there. There'll be hotels, apartments. It's a very diverse development that'll surround Wrigley and make it a pretty cool destination."
Not just Wrigleyville
Wrigleyville isn't the only area getting attention.
"There's some great projects that are being done, like New City, (which) was done by Structured Development," Warsek said. "That was a really terrific example … of a mixed-use project that (offered) entertainment, grocery, retail, restaurants and then the ability to live there ..."
The new development doesn't stop there.
"The other area that we're seeing that's emerging into a pretty amazing addition to the city is the Fulton Market," Warsek said. "And it's not just one project, per se, but it's multiple developers, predominantly Sterling Bay, really doing some amazing things over there and creating this new submarket of entertainment (and) retail. We already had great restaurants there, so you throw in the access, it's a pretty exciting place to lend. We've been very active in the West Loop in the Fulton Market District."
Equal Housing Lender. Associated Bank, N.A. Member FDIC