Our state’s unemployment rate is 8.4%, the third worst in the United States. (That's not a report card you'd want your parents to sign.) We spoke to some commercial real estate pros on how it’s affecting their business and what needs to change.
Not enough bread-and-butter suburban office deals
While some small businesses have dipped a toe in expansion, bread-and-butter deals (5k SF to 20k SF) in the suburbs are hard to find these days, Hamilton Partners partner Mike Rolfs (right, with pro golfer Fred Funk) tells us. With the state’s tax structure out of alignment, small and mid-size businesses are scared to commit to hiring in Illinois and often opt for part-time workers to avoid paying costly benefits, he says. The bottom line: tenants have lots of options, so properties need a killer first impression (think food service and ample parking... and maybe some live entertainment wouldn't hurt, clowns are cheap). Hamilton just sold 259k SF Riverwalk II in Buffalo Grove to Beacon Investment Properties, Mike says. After spending much of the winter golfing in Arizona, he can’t wait to see his daughter get married and his youngest son graduate from Notre Dame.
Retail’s two worlds reflect the job climate
GK Development president Garo Kholamian (right) says Chicago’s robust economy has kept retail leasing demand solid, but suburban retail has suffered as jobs continue to migrate downtown. Illinois needs a more pro-business climate to stop companies’ highly publicized moves to Texas, Garo says, mentioning that even the superintendent of his school district just decided to jump ship to the Lone Star State. Deals and rents will stall until the income and property tax questions are settled, he tell us. But the suburbs have seen a slight uptick from intrepid service and restaurant tenants (drive-thrus are hot, which should mean car cleaning services are also hot), Garo says, along with more unique uses like video gambling cafes. GK hopes to break ground in spring 2015 on The Bridges, a 200k SF retail project at the SE corner of Division and Halsted.
Necessity is the mother of invention
Could there possibly be a bright spot amidst all the doom and gloom of major unemployment? Look no further than SBA lending on owner-occupied real estate, SomerCor 504 VP Bill Kornit tells us. Small businesses surge when traditional employment opportunities fade, and the ability to buy their real estate with 90% financing allows them to free up capital and hire more employees. Bill says the SBA’s 504 loan volume directly correlates to job creation (especially if Congress brings back the SBA’s popular refi program). Illinois’s looming pension issue is a major black cloud, but nobody can compete with our central location, transportation infrastructure, and strong labor pool (why Rahm is pushing Chicago as a tech hub), Bill adds. He just did several medical deals in McHenry County, and spends his off-hours enjoying outdoor activities with his sons (on a recent camping trip, above), including coaching both their baseball teams.