'Big, Tasty Nothingburger': CRE Leaders Say Tariffs, Chicago Politics Stalled Deals In First Half Of 2025

Chicago’s commercial real estate professionals are sounding the alarm on national trade policy and local politics, pinning the blame for slowed-down dealmaking and shaky market confidence on government decisions that haven't been kind to commercial real estate.

President Donald Trump’s tariffs and the state of geopolitics were cited as the largest macro risks to the city’s real estate, according to a Chicago mid-year sentiment report produced by The Real Estate Center at DePaul University, in conjunction with Urban Land Institute, Chicago District Council.

Federal turmoil has meant a slow start to 2025, and many in the CRE community say activity stalled significantly in the first half of the year.

“The first half of the year was a big tasty nothingburger,” KWILL Merchant Advisors co-founder Hugh Williams said in the report. “We’re looking for tremendous improvement in the second half of 2025.”

Survey respondents said tariffs will have a significant impact on the way they'll be doing business, taking into account the actual charge rates and the administration's volatile implementation of the levies. Roughly 9 in 10 professionals, or 85%, said tariffs will have a moderate to very high impact on business. Three in 10 said the impact will be very high.

Mavrek Development principal Anthony Hrusovsky said in the report that tariffs killed negotiations with a large equity investor it was in talks with for a project at 1000 W. Jackson Blvd. 

“It introduced a level of uncertainty around cost, which had previously been riskless in our eyes,” Hrusovsky said. “The last thing Chicago needs right now is another reason for an equity group to not do a deal.”

But the volatility of tariffs may have a larger impact on capital markets than real construction costs. The McShane Cos. CEO Molly McShane said she hasn't seen tariffs represented at scale in elevated pricing numbers from subcontractors. But tariffs dominate a lot of conversations of late, she added. 

“It’s a discussion point in large part because of the uncertainty and the shock value that is created when the administration announces tariffs on countries or specific products,” McShane said.

Local government got a bashing in the report as well, with CRE professionals giving City Hall an overwhelmingly frosty reception. Just 1% of respondents reported satisfaction and 85% indicated they are unhappy. When it comes to lawmakers in Washington, D.C., just 8% said they were satisfied with leadership and 61% reported being dissatisfied. 

“Industrial developers don’t want to develop in the city because if a site is over a certain size, there are many more hoops to go through,” Williams said. “Dealing with the aldermanic prerogative can be a problem, unless the alderman is talented and pro-business.”

The greatest long-term challenges to the city center on taxes and the municipal budget, with safety issues dropping 26 basis points from last year's survey. The responses are in part due to improving crime statistics, the report's authors said. 

Meanwhile, many are predicting economic gloom ahead. Sixty-six percent of respondents expect a recession before the end of 2026, and 51% think inflation will be higher 12 months from now.

Yet the news is not all bad.

Even against a backdrop of near-term macro uncertainty, 43% of those surveyed think the bid-ask spread has narrowed over the past year. Respondents expect even more improvement next year, with 58% expecting further decreases in spreads.

Among those expecting narrowing, a 2-to-1 margin expects sellers to move more significantly than buyers. This runs counter to the school of thought that “dry powder” sitting on the sidelines will cause the gap to narrow as funds grow impatient to deploy raised capital.

On the local side, more than 73% of professionals said the number of investment opportunities at their pricing levels is on an upswing.

Over 77% of respondents said equity sources with reasonable return expectations are improving. Even lenders have begun to come back into the fray, with 71% of people surveyed suggesting that debt pricing that allows for positive leverage is either improving or plentiful. 

“Although the landscape is more heavily skewed toward improving than plentiful, the results demonstrate that opportunities and the availability of debt and equity are relatively in sync,” said Reagan Pratt, director at The Real Estate Center at DePaul University.  

CRE pros expect the top sources of equity investment in the city will come from U.S. family offices and private wealth, local institutions like pension funds, foundations, endowments, and friends and family. 

“The smaller neighborhood deals have been much easier to push ahead on, which has a lot to do with the investor base,” Hrusovsky said. “If a high net worth investor likes the fundamentals of a deal and understands the compelling opportunity created by the current supply-demand imbalance in Chicago, they will invest. It’s their money, and they make the call without answering to a board.”

Debt is also anticipated to be overwhelmingly sourced locally over the next 24 months. Better-capitalized regional banks were identified by 71% of real estate professionals as being primary sources of debt. Large banks were expected sources of debt capital for just 31% of those respondents, and small local banks were cited by only 36% of respondents.

Still, respondents were cautious about their expectations for the remainder of 2025. Bullish and bearish sentiment came in at about 20% each, but 61% of respondents said they are somewhere in between. 

“What the industry sentiment survey tells us about the overall economy is that there are some conflicting yet general hopeful messages in the marketplace, and the conflicting messages are that there are lots of macro market risks,” said James Shilling, chair of the department of finance and real estate at DePaul.