• Chicago

Q&A: Strong Demand, Tight Inventory in the City of Chicago

By Hallie Woods, Marketing Associate

The City of Chicago commercial real estate market continues to show strength through the first quarter of 2018. Demand for well-located functional space remains steady as several new developments are expected to be delivered this year. Inventory remains extremely tight creating a competitive environment for typical users looking to buy and with record pricing for user/owners looking to sell. The result is an increase in overall leasing activity, particularly in new construction.

Historically, a typical user is a company that is relocating/expanding within the City. While activity from these groups continue, we are now starting to see new ventures and a steady flow of deals from users opening their first city location.

We discuss this hot topic with Colin Green.

Q: Where are you seeing the most opportunity for investors and developers?

Colin: There is a steady flow of new developments that will be delivered over the next two years, but few can accommodate small tenants, which we define as 20,000-30,000 square feet. Since well-located small spaces are rare, they generally lease very well.

Q: Is there still land to buy — If I’m an investor or developer, where should I be looking?

Colin: Yes, put simply, there is still land to buy. Supply for land along I55 going into the City is limited, but there is still immense opportunity to purchase land farther south along I94 (85th street –115th street). That area should be viewed as an attractive low-cost alternative to tenants being priced out of infill areas. This is legitimized by recent high profile deals in the area such as Method Soap, Whole Foods, and Chinese Southern Railroad.

Q: I’m a user and owner of my building. I’m currently out of space but prefer to purchase. What should I do?

Colin: Be open-minded to leasing, especially if your business is growing rapidly. There are several benefits to leasing as opposed to purchasing that are often overlooked including flexibility for growing companies and less building maintenance for tenants. If leasing is not an option, consider a sale-leaseback. Investors are eager to buy buildings and will often offer flexible leaseback terms that will allow you to pursue a purchase while still operating out of your existing building.

  • Chicago

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