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DePaul University: Chicago Attracting Investors, But COVID, Taxes are Issues

September 2021

Chicago’s commercial real estate industry is faring well at this stage in the pandemic recovery, but there are headwinds that investors should consider, according to a 2021 Mid-Year Chicago Sentiment Report from The Real Estate Center at DePaul University. Nearly 60% of CRE professionals are optimistic, if not bullish, about Chicago commercial real estate for the next 18 months. There are concerns, however, related to government effectiveness and property tax uncertainty at the local, county and state levels.

“Capital is still flowing as investors remain optimistic,” said Charles Wurtzebach, Douglas and Cynthia Crocker Endowed Director of The Real Estate Center. “People know that traditional economic forces like oversupply and lack of demand did not cause the ‘pandemic downturn’.  We were dragged into it kicking and screaming and we want it to be over.”

COVID-19 Impact on Real Estate

Industry experts also weighed in on their expectations for in-person versus remote working, with 39.3% expecting workers to be in the office at least 50% of the time and 32.7% expected flexibility. Survey respondents were nearly evenly split on vaccine requirements, with the “yes” votes winning at 56.1% versus 43.9% saying “no.” (Note that the survey was conducted in mid-summer, ahead of the surge in Delta variant cases).

Chicago Commercial Real Estate Report Findings

Among the findings of the 4th Annual Chicago Mid-Year Sentiment Report include:

  • Nearly 6 in 10 CRE professionals are at least optimistic, if not bullish, about Chicago real estate for the next 18 months.
  • The market factors causing the greatest concern at mid-year include the rising cost of construction, materials and labor, changing tax structures and rising inflation.
  • The greatest threats to CRE investment activity range from the economic conditions put on local and state governments, followed by lingering concerns about the potential for financial and economic distress.
  • Real estate professionals are genuinely concerned, perhaps even skeptical, about the effectiveness of political leadership at virtually all levels of government.
  • There is nothing more certain than death, taxes and property tax uncertainty in Cook County. Those concerns, and uncertainty, aren’t going away.
  • Industrial properties followed by multifamily assets are viewed the most favorably and the least likely to encounter future distress; indoor malls, viewed as the weakest asset class, are likely candidates for distress.
The survey included responses from real estate professionals with ties to The Real Estate Center at DePaul University, The Real Estate Investment Association (REIA) and the CoreNet Global | Chicago Chapter.

See this Connect Media story for more.

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