August 26, 2019 by Brian Rogal

Bisnow Survey Shows No Consensus In Chicago's Controversial Reputation As An Investment Magnet

Courtesy of Related Midwest

The 78's Crescent Park looking north with contributions by architect SOM.

There is little agreement about Chicago’s current standing with the investment community, or whether its reputation will help attract enough equity to fuel developers’ massive plans to greatly expand the Central Business District, according to respondents in a recent Bisnow poll.

The poll revealed a split among respondents, 40% of whom felt Chicago’s reputation as a good investment had strengthened within the past few years, versus the 40% who thought its standing fell, and the 18% that saw no change.

That reputation will play a big role over the next few years, as Sterling Bay fully launches its Lincoln Yards mixed-use development on the North Side, and Related Midwest begins building The 78 community on the Near South Side, along with the many similar complexes planned by other developers.

Just over one-third of respondents felt Chicago has too many developers readying new large-scale projects all at once, and that one or more of these builders will fail to raise sufficient equity. And 45% felt that although this group will attract enough investment, it will take more time than originally planned.      

Beliefs about the impact of a recession on Chicago developers’ ambitious plans are also mixed. Almost half of the poll respondents had few worries. They believe the region’s commercial real estate sector rests on such a solid foundation that, even in a downturn, it would hold its own when competing for dollars against coastal markets like New York, Los Angeles and San Francisco. But 35% said smart money will always flow toward the coasts during a downturn.    

A major expansion of Chicago’s CBD is not the only profound change looming ahead.

Fritz Kaegi, the new Cook County assessor, has begun a top-to-bottom revamp of the property assessment system, and even though many fear that will eventually mean higher taxes, perhaps discouraging new investment, others think it will help bring in more outside investors by aligning the county’s methods with those in other major metro areas.

Higher taxes are by far the chief worry of investors considering putting their money to work in Chicago, according to poll respondents. Sixty-one percent said it was a bigger concern than state or city budget shortfalls, a possible recession or too much new supply hitting the market at the same time.

Almost half of poll respondents feel Kaegi's reform efforts will weaken the city's ability to attract U.S. equity to Chicago, though Kaegi does have his fans — 22% of respondents feel his reforms will make it easier.

Feelings about the assessor’s potential impact on foreign investors are even more mixed. Overseas investors would be less interested in Chicago if Kaegi successfully implements his plans, according to 55% of poll respondents, but 44% said that would strengthen Chicago’s reputation and desirability.