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Old 12-10-2020, 10:42 PM
 
Location: Chicago, Little Village
4,478 posts, read 7,913,680 times
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Quote:
Originally Posted by dtcbnd03 View Post
How??? This is very surprising. On the one hand we have a nationwide housing shortage but on the other we definitely have a post-covid trend away from urban centers to secondary mid-tier cities and suburbs. There is a huge glut in Chicago high rises. The rent in my building is still down 20-25% from a year ago so is this simply fueled by cheap money and nothing else to invest in?
Multi-units are red hot right now. A lot of coastal money is pouring into certain areas which have value and are easily accessible to the Loop. So I'd take that to mean that most investors are bullish on the future of Chicago.
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Old 12-11-2020, 12:06 AM
 
881 posts, read 485,695 times
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Originally Posted by BRU67 View Post
Multi-units are red hot right now. A lot of coastal money is pouring into certain areas which have value and are easily accessible to the Loop. So I'd take that to mean that most investors are bullish on the future of Chicago.
Mid and high rise multiunits? I am not seeing that in the West Loop or Fulton Market. Or anywhere in Chicago for that matter. 1247-1249 W. Madison Street just sold in October for a 20% discount on a price per unit and sqft basis than Monroe Aberdeen at 1050 W Monroe that sold right before covid in March.

https://rejournals.com/west-loop-mul...-32-8-million/

I would be curious to see the mid and high rise buildings that are selling at red hot prices. I did notice McDonalds HQ sold at a hot price but that's about it. If you're referring to 2-4 unit multiunits then those are only red hot in lower end hoods where pricing scarcity exists and people are looking for space. They're certainly not hot in say a Logan Square which was one of the hottest hoods pre-covid. Can't really talk about 2-4 units in West Loop cause they don't exist.

Last edited by dtcbnd03; 12-11-2020 at 12:16 AM..
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Old 12-11-2020, 08:12 AM
 
Location: Chicago, Little Village
4,478 posts, read 7,913,680 times
Reputation: 3393
Quote:
Originally Posted by dtcbnd03 View Post
Mid and high rise multiunits? I am not seeing that in the West Loop or Fulton Market. Or anywhere in Chicago for that matter. 1247-1249 W. Madison Street just sold in October for a 20% discount on a price per unit and sqft basis than Monroe Aberdeen at 1050 W Monroe that sold right before covid in March.

https://rejournals.com/west-loop-mul...-32-8-million/

I would be curious to see the mid and high rise buildings that are selling at red hot prices. I did notice McDonalds HQ sold at a hot price but that's about it. If you're referring to 2-4 unit multiunits then those are only red hot in lower end hoods where pricing scarcity exists and people are looking for space. They're certainly not hot in say a Logan Square which was one of the hottest hoods pre-covid. Can't really talk about 2-4 units in West Loop cause they don't exist.
"Nearly all of the properties we have looked at to purchase this year have traded with seemingly little to no discount relative to pre-COVID pricing. After looking at and bidding on countless deals, we finally feel like this was our discounted shot.”

That's more what I'm seeing too. I'm seeing coastal investors and other wealthy cash investors buying 2-4 units, not poor families looking for space. Millennials have backed out of the market a bit, for now, but I suspect that'll pick back up again post-COVID. And as to Logan Square, Zillow predicts values will increase 8% in the 60647 zip code next year. None of this is consistent with the theory that the Chicago real estate market is collapsing.

Last edited by BRU67; 12-11-2020 at 08:21 AM..
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Old 12-11-2020, 08:40 AM
 
881 posts, read 485,695 times
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So flat to slightly discounted from 9 months ago? That's hardly red hot and speaks more to cautious optimism. I foresee anyone investing in mid to high rise commercial or residential buildings in the West Loop at anywhere near pre-covid prices will get hurt in the future.

Chicago is a great city and the best livable downtown IMO. But all big cities were driven the last 10 years by urbanization in large part as a result of corporate relocations to downtown. The top two reasons someone lived downtown was (1) to be close to work and (2) to be close to public transportation to get to work...and the corporations moved downtown to be near that talent pool. Certainly living close to bars, restaurants and the buzz of the big city were demand factors as well but those were say factors 3/4/5. But covid has delivered a sizable...and permanent...reduction to office and public transpo demand. Remote work is here to stay.

As covid ends, I do not see millennial and gen Z workers rushing to pack into high priced rentals and condos just to live near an office they'll rarely if ever go to. All we heard for the last 10 years was how those same generations were being crushed by high rents and unable to buy a house or get ahead with high housing costs. Now that they can live wherever and Zoom, Teams, Salesforce, Docusign and Cloud 90% of their work...the choices of where to live are endless. Some will still choose Chicago but you will see the spread and flattening of the US to secondary cities with similar and more affordable amenities.
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Old 12-11-2020, 10:35 AM
 
327 posts, read 128,617 times
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Quote:
Originally Posted by dtcbnd03 View Post
So flat to slightly discounted from 9 months ago? That's hardly red hot and speaks more to cautious optimism. I foresee anyone investing in mid to high rise commercial or residential buildings in the West Loop at anywhere near pre-covid prices will get hurt in the future.

Chicago is a great city and the best livable downtown IMO. But all big cities were driven the last 10 years by urbanization in large part as a result of corporate relocations to downtown. The top two reasons someone lived downtown was (1) to be close to work and (2) to be close to public transportation to get to work...and the corporations moved downtown to be near that talent pool. Certainly living close to bars, restaurants and the buzz of the big city were demand factors as well but those were say factors 3/4/5. But covid has delivered a sizable...and permanent...reduction to office and public transpo demand. Remote work is here to stay.

As covid ends, I do not see millennial and gen Z workers rushing to pack into high priced rentals and condos just to live near an office they'll rarely if ever go to. All we heard for the last 10 years was how those same generations were being crushed by high rents and unable to buy a house or get ahead with high housing costs. Now that they can live wherever and Zoom, Teams, Salesforce, Docusign and Cloud 90% of their work...the choices of where to live are endless. Some will still choose Chicago but you will see the spread and flattening of the US to secondary cities with similar and more affordable amenities.
Salesforce is driving the construction of their 835' tower in Chicago. I believe they have another large tower being built in San Francisco. If they weren't in need of large office space then I don't see why they wouldn't have canceled their lease. Same for Bank of America and BMO.

It was announced that the developers who revitalized the Old Post Office are now moving to 801 S. Canal to perform a $180 million reno with work beginning in a couple weeks.



World renowned chef Curtis Duffy opened a $5 million Three-Michelin-Star quality restaurant this past summer during the pandemic.

Sterling Bay also demolished Coyne College during the pandemic to prepare for their other 300' buildings near Green.

Google's expansion at 320 N. Sangamon in Fulton Market is almost complete.



This proposal for a hotel, grocery store and residential at 525 S. Wabash in the South Loop has been approved by Reilly and is seeking Plan Comission approval this month. It's not only the West Loop/Fulton Market that is seeing investment.



This 15 story tower at 609 W. Randolph was signed-off on by Reilly and approved by the Plan Commission in October.



Magellan landed St. Regis for a luxury hotel and Alinea group for the restaurant operator at the former Vista Tower.

Jose Andreas is opening a flagship fine-dining restaurant at 110 N. Wacker (BoA Tower)

JK Equities is reprogramming 1000M to mostly apartments in an attempt to resume consatruction and gain further financing.

I can't see these people throwing their money away so the number crunchers must see somethinmg in the trends that gives them hope. Chicago historically is not a city that overbuilds and gluts the market.
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Old 12-11-2020, 10:43 AM
 
Location: Chicago, Little Village
4,478 posts, read 7,913,680 times
Reputation: 3393
Quote:
Originally Posted by dtcbnd03 View Post
So flat to slightly discounted from 9 months ago? That's hardly red hot and speaks more to cautious optimism. I foresee anyone investing in mid to high rise commercial or residential buildings in the West Loop at anywhere near pre-covid prices will get hurt in the future.

Chicago is a great city and the best livable downtown IMO. But all big cities were driven the last 10 years by urbanization in large part as a result of corporate relocations to downtown. The top two reasons someone lived downtown was (1) to be close to work and (2) to be close to public transportation to get to work...and the corporations moved downtown to be near that talent pool. Certainly living close to bars, restaurants and the buzz of the big city were demand factors as well but those were say factors 3/4/5. But covid has delivered a sizable...and permanent...reduction to office and public transpo demand. Remote work is here to stay.

As covid ends, I do not see millennial and gen Z workers rushing to pack into high priced rentals and condos just to live near an office they'll rarely if ever go to. All we heard for the last 10 years was how those same generations were being crushed by high rents and unable to buy a house or get ahead with high housing costs. Now that they can live wherever and Zoom, Teams, Salesforce, Docusign and Cloud 90% of their work...the choices of where to live are endless. Some will still choose Chicago but you will see the spread and flattening of the US to secondary cities with similar and more affordable amenities.
Who knows? I can't say you're right and I can't say you're wrong because I don't have a crystal ball. I would caution against going all-in on the idea that Millennials are going to reject office life and go their own way though. Having an office in a densely packed place like the West Loop opens up social opportunities that your living room or a small city does not. I still see companies maintaining offices in hip urban areas to attract a young workforce.
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Old 12-11-2020, 11:11 AM
 
881 posts, read 485,695 times
Reputation: 1426
Quote:
Originally Posted by IronWright View Post
Salesforce is driving the construction of their 835' tower in Chicago. I believe they have another large tower being built in San Francisco. If they weren't in need of large office space then I don't see why they wouldn't have canceled their lease. Same for Bank of America and BMO.
I don't believe these pre-covid investments / leases can be canceled. The developers sign up a tenant in order to obtain the financing to build the building. There have to be pretty significant financial penalties to back out of those leases so BofA, BMO and Salesforce are likely moving forward because of this. If they could back out I bet they would.

Also 1000M lenders Goldman Sachs pulled their financing in July as a direct result of covid and real estate demand...so that's why they're switching to apartments because it's easier to finance a building on apartment spec than condo sales.

I doubt 2021 will have new big name tenants signing up for office space post-covid. I know my company is looking to downsize office space and attributed it to "cost savings and employee demand for remote work". The developers are certainly closer to the numbers than I am but my gut says otherwise. Although I will admit Chicago real estate is still a cheap relative to other big cities.
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Old 12-11-2020, 12:17 PM
 
327 posts, read 128,617 times
Reputation: 416
Quote:
Originally Posted by dtcbnd03 View Post
I don't believe these pre-covid investments / leases can be canceled. The developers sign up a tenant in order to obtain the financing to build the building. There have to be pretty significant financial penalties to back out of those leases so BofA, BMO and Salesforce are likely moving forward because of this. If they could back out I bet they would.

Also 1000M lenders Goldman Sachs pulled their financing in July as a direct result of covid and real estate demand...so that's why they're switching to apartments because it's easier to finance a building on apartment spec than condo sales.

I doubt 2021 will have new big name tenants signing up for office space post-covid. I know my company is looking to downsize office space and attributed it to "cost savings and employee demand for remote work". The developers are certainly closer to the numbers than I am but my gut says otherwise. Although I will admit Chicago real estate is still a cheap relative to other big cities.
I don't know the particluars of these deals made but Uber Freight came out and said that they were delaying their move into the 463,000 sq. ft. office space at the Old Post Office. They are on record as saying they will move-in, in 2021.

Goolge had plans for Sterling Bay to construct an 11 story building at 345 N. Morgan and halted it. Supposedly they still have plans to add thousands of jobs by 2025.

Cameo's CEO stated that he had an agreement to lease a building in Fulton Market and backed out to go totally remote.

In my personal opinion corporations that massive could easily cancel plans and absorb penalties if they were dead set on working from home. At the very least they could try to sublease the space if they didn't have confidence in the future office market.

I think that the most likely scenario is buildings will be designed to be built pandemic-conscious, whatever that entails but if you look at the $250 million Discover Partners Institute that was just funded $142 million by the state and awarded to OMA architects for design I don't see how a massive tech innovation hub that will gather thousands of people would move forward if the future is to avoid public gathering.
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Old 12-11-2020, 12:19 PM
 
327 posts, read 128,617 times
Reputation: 416
Quote:
Originally Posted by dtcbnd03 View Post
I don't believe these pre-covid investments / leases can be canceled. The developers sign up a tenant in order to obtain the financing to build the building. There have to be pretty significant financial penalties to back out of those leases so BofA, BMO and Salesforce are likely moving forward because of this. If they could back out I bet they would.

Also 1000M lenders Goldman Sachs pulled their financing in July as a direct result of covid and real estate demand...so that's why they're switching to apartments because it's easier to finance a building on apartment spec than condo sales.

I doubt 2021 will have new big name tenants signing up for office space post-covid. I know my company is looking to downsize office space and attributed it to "cost savings and employee demand for remote work". The developers are certainly closer to the numbers than I am but my gut says otherwise. Although I will admit Chicago real estate is still a cheap relative to other big cities.
I don't know the particluars of these deals made but Uber Freight came out and said that they were delaying their move into the 463,000 sq. ft. office space at the Old Post Office. They are on record as saying they will move-in, in 2021.

Goolge had plans for Sterling Bay to construct an 11 story building at 345 N. Morgan and halted it. Supposedly they still have plans to add thousands of jobs by 2025.

Cameo's CEO stated that he had an agreement to lease a building in Fulton Market and backed out to go totally remote.

In my personal opinion corporations that massive could easily cancel plans and absorb penalties if they were dead set on working from home. At the very least they could try to sublease the space if they didn't have confidence in the future office market.

I think that the most likely scenario is buildings will be designed to be built pandemic-conscious, whatever that entails but if you look at the $250 million Discover Partners Institute that was just funded $142 million by the state and awarded to OMA architects for design I don't see how a massive tech innovation hub that will gather thousands of people would move forward if the future is to avoid public gathering and big cities.
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Old 12-15-2020, 10:48 AM
 
Location: Chicago, Little Village
4,478 posts, read 7,913,680 times
Reputation: 3393
Quote:
Originally Posted by dtcbnd03 View Post
So flat to slightly discounted from 9 months ago? That's hardly red hot and speaks more to cautious optimism. I foresee anyone investing in mid to high rise commercial or residential buildings in the West Loop at anywhere near pre-covid prices will get hurt in the future.

Chicago is a great city and the best livable downtown IMO. But all big cities were driven the last 10 years by urbanization in large part as a result of corporate relocations to downtown. The top two reasons someone lived downtown was (1) to be close to work and (2) to be close to public transportation to get to work...and the corporations moved downtown to be near that talent pool. Certainly living close to bars, restaurants and the buzz of the big city were demand factors as well but those were say factors 3/4/5. But covid has delivered a sizable...and permanent...reduction to office and public transpo demand. Remote work is here to stay.

As covid ends, I do not see millennial and gen Z workers rushing to pack into high priced rentals and condos just to live near an office they'll rarely if ever go to. All we heard for the last 10 years was how those same generations were being crushed by high rents and unable to buy a house or get ahead with high housing costs. Now that they can live wherever and Zoom, Teams, Salesforce, Docusign and Cloud 90% of their work...the choices of where to live are endless. Some will still choose Chicago but you will see the spread and flattening of the US to secondary cities with similar and more affordable amenities.
https://www.chicagotribune.com/real-...~1~8~art%20yes

Word around Chicago real estate circles is that COVID-19 has slowed residential sales downtown, as more people work remotely and seek out larger homes with more elbow room and outdoor space in outer neighborhoods and suburbs.

Lendlease Chicago’s executive general manager of development Ted Weldon, however, sees nothing but promise for downtown home sales in the coming years — which is fortunate, as his company is readying for its next phase of the Southbank development on the edge of the Chicago River.

“There is always migration to the suburbs, but we’re very bullish on the urban downtown market,” Weldon said. “People love and thrive on the nightlife and the incredibly short commute. It’s a trade-off — if you live in the suburbs, you’re looking at an hour commute every day.”
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