When will the real estate market recover? Not very quickly, according to many commercial real estate experts surveyed and interviewed for a recent report from the Real Estate Center at DePaul University. As noted in this Bisnow real estate story, more than 60% of survey respondents are either concerned or trending toward concerned about the market’s direction.
COVID-19 Commercial Real Estate Outlook
The Third Annual Mid-Year Perspectives on Chicago Real Estate Markets report also showed that less than one-third are either optimistic or moving toward optimistic. “COVID-19 has dealt every market across the country a set of challenges and circumstances no one could have anticipated,” said Charles Wurtzebach, the Douglas and Cynthia Crocker endowed director of the Real Estate Center at DePaul University. “Yet people want to be optimistic; they are tired of COVID and want it to be over.”
Among the biggest concerned noted in the survey are:
- the unknown duration and intensity of the pandemic
- the financial crunch on state and local governments
- rising unemployment and
- the uncertainty about the timing of a vaccine
Given these factors, survey participants pointed to a slow “Nike swoosh” recovery versus a rapid “V” recovery. This is due to the stable Midwestern mode of Chicago, which typically sees moderate-growth for commercial real estate versus the stronger extremes seen in coastal markets.
While many survey participants addressed the concerns with today’s marketplace, Brian Forde, Partner, O’Keefe Lyons & Hynes, LLC chose to highlight some of the glass half full and big picture aspects of the current situation.
“Real estate developers and brokers are as creative a group of professionals as you can imagine,” Forde says. “They adapt, they innovate, they don’t sit still. Given everything that has happened, there will be difficulties, but in response to those challenges, there will also be creative adaptation. Difficult challenges tend to bring out the best in real estate professionals.”
Cook County Tax Increases: The ongoing market threat
Chief among the market threats is the Cook County tax situation, which is different than any of the other 101 counties in Illinois. Before the pandemic, the Assessor showed his hand in Evanston in terms of how valuations and the valuation process would change. It was viewed as a precursor of what is to come. Looming large on the horizon are the valuations for downtown properties, which won’t be completed until 2021.
Forde believes Cook County property taxes will continue to be a real threat to property investors and business owners. “As long as Cook County uses a classification system where commercial and industrial real estate is assessed at 2-1/2 times that of residential properties, property taxes will always be a challenge, and it always will be so long as the system currently in place persists,” Forde says. “That will be further exacerbated when coupled with the inability of taxing officials to manage the sheer volume of valuing 1.8 million parcels. There is just no one size fits all solution.”
For more, see the DePaul University Mid-Year report.