Chicago Bears Outnumber The Bulls By A Wide Margin When It Comes To CRE Outlook
Chicago CRE professionals are nearly twice as gloomy about overall market conditions as they were last year, according to a new report finding just 4.4% are bullish on the state of the market.
Nearly 46% of real estate professionals say they are bearish on market conditions over the next six months, up from 23.7% a year ago. Including those describing themselves as bears, more than 82% said they were concerned, up from 65% last year, according to the 2023 Chicago Mid-Year Sentiment Report developed by the Real Estate Center at DePaul University and Urban Land Institute Chicago District Council.
The percentage of those optimistic about the near future is the lowest in the report’s six-year history.
"It’s a market unlike anything we’ve seen before,” James Shilling, DePaul finance professor and George L. Ruff endowed chair in the Real Estate Center, said in a release. “The report cites more than a dozen threats acting as headwinds, all posing a significant risk to the health of the real estate market and cities. And at the same time, job numbers are good, and unlike 9 of the 12 recessions since World War II, the driving force is not housing related."
More than 75% of respondents said they believe the market is in a recession or will be by the end of the year. Rising interest rates and additional bank failures also topped the charts in terms of national-level concerns. Locally, real estate stakeholders are most worried about high crime rates, ongoing property tax uncertainty and the effectiveness of political leaders, including new Mayor Brandon Johnson.
While real estate interests didn’t exactly line up behind Johnson in the run-up to the election, they do have a clear idea of what his priorities should be. Ranked on a scale from 1 to 5, lowering crime rates earned a 4.57, the only priority to top a 4. The next closest priority was streamlining the development approval process, which earned a 3.55 rating.
In remarks cited in the study, Sterling Bay Managing Principal Dean Marks said he was optimistic about Johnson’s tenure based on early interactions, noting “it’s a welcome path the administration is following.”
Other respondents were less certain, according to comments in the report, including one person who was “very concerned about the new mayor and lack of experience” and another who said that “Johnson adds another element of uncertainty after years of [Cook County Assessor Fritz] Kaegi doing the same; it causes a wait and see mentality.”
The report didn't specifically mine responses about the city’s public relations image, but respondents repeatedly brought up the city’s shortcomings in that regard.
Despite the negative sentiment for the remainder of the year, 38.6% said they were optimistic things would turn around next year, a slight increase over the 35% who thought the same last year.
“While coastal growth has historically been greater, Chicago’s potential for robust growth is unassailable due to its powerful assets,” Capri Investment Group founder and Executive Chairman Quintin Primo said. “We have a plethora of prestigious universities turning out STEM graduates, a location in the center of the nation and on the shore of the world’s largest network of freshwater lakes and world-class cultural assets, housing, mass transit and more.
“Over the course of the next 20 to 30 years, I believe Chicago could move back to being the second largest city in the country.”