L-R: Lee Kiser, principal of Kiser Group; Steve Fifield, chairman and CEO of Fifield Cos.; Collete English Dixon, principal – Transactions for Prudential Real Estate Investors; Robert Buford, president and CEO of Planned Realty Group; Ari Golson, principal and founding member of The Wolcott Group LLC; Ron DeVries, vice president at Appraisal Research Counselors; and Chris Irwin, senior vice president of Retail Sales & Leasing at Jameson Commercial.
By Jeffrey Steele, Contributing Writer
Chicago—“Politeness is not a part of the script.”
With those words from moderator Lee Kiser, co-founder of Chicago commercial real estate brokerage Kiser Group, a lively, sometimes scrappy panel discussion was initiated last Thursday night in Chicago. The occasion was the 2012 edition of the Lincoln Park Builders-sponsored Real Estate Forum, Chicago’s premier networking, educational and social event for the real estate community.
Assembled around Kiser at the historic Germania Club on the city’s near-north side was a panel comprised of Chicago’s leading real estate experts. Those experts wasted little time launching into a spirited discussion of the issues of concern to developers and owners of multifamily properties in the Windy City.
Among key points receiving a measure of unanimity were these.
Robert Buford, co-founder of Planned Realty Group, whose portfolio includes 25 mid-rise and high-rise apartment buildings and 3,000 apartments, noted that for investors and operators like himself, the issues are no different today than they have ever been.
“They are where to buy, how much to pay, is it time to rehab and upgrade, and how much higher can rents go before renters become buyers?” Buford said. “Explore those issues and you can’t help but improve return on investment.”
Noting the top end of the Chicago market has seen rent increases of more than 8 percent in the last year, Ron DeVries, vice president with appraisal and consulting firm Appraisal Research Counselors, said the big question is what will happen in 2013 and 2014, when an average of 2,000 units will be added each year. “We think rents will hold pretty well next year,” he said, noting there’s not as much certainty about where rents will head in 2014.
Steven Fifield, founder of Fifield Companies, for 30 years among the most prolific and successful of Chicago office and residential developers, noted his company will deliver 496 units in spring, and 400 to 500 units yearly to 2015 and beyond.
Companies seeking the best and brightest talent will prefer the city of Chicago, and that talent has a preference for living and playing close to work, he said. Forecasting job growth downtown in 2014 and 2015, he added, “I predict a shortage of apartments during that same time will drive some renters back into nearby neighborhoods like West Loop, West Tower, Bucktown and Lakeview.”
Adjusting DeVries’ estimate upward, he added he and other developers will deliver 2,500 units yearly in 2013 and 2014, and all will be absorbed by 2015.
Collete English Dixon, principal, transactions, with Prudential Real Estate Investors, noted that the hottest rental markets are those coastal metros she termed the “Sexy Six,” Boston, New York City, Washington, D.C., Miami, Seattle and San Francisco. “But Chicago’s the third largest MSA in the country and will always be on investors’ lists,” she added. “There will be interest because we’re the biggest, boldest, baddest place in the Midwest.”
She added that in many areas of the country, it’s becoming more expensive to rent than to buy. In Chicago, she said, that threshold hasn’t yet been crossed, but added, “Eventually, echo boomers are going to want a place to own.”
Buford seemed to speak for most of the panelists when he concluded: “I think we have more upside before renters become buyers.”