Winds of Change Buffet Chicago Multifamily
At the Lincoln Park Builders of Chicago Real Estate Forum, panelists shared insights on what’s next for the city’s development market.
By Jeffrey Steele
Chicagoans know one thing to be true. If you don’t like the weather, just wait 15 minutes and it will change. That’s why weather forecasting seemed a particularly apt metaphor for this year’s edition of the Lincoln Park Builders of Chicago Real Estate Forum. The Windy City’s weather and its multifamily climate are both unpredictable. But that doesn’t mean weather forecasters and multifamily experts shouldn’t try to forecast the future.
To fete the Golden Anniversary of its 1967 founding, Lincoln Park Builders of Chicago tabbed JAB Real Estate principal James Jann as moderator, and gathered at Germania Place a panel of some of the city’s most accomplished real estate veterans.
The panelists were Susan Tjarksen, principal and managing broker at KIG CRE and chairman of Enodo Inc.; Marty Paris, president of Sedgwick Properties Development Corporation; Steve Fifield, chairman and CEO of Fifield Companies; Bob Flannery, chief operating officer at CA Ventures; and Jeffrey Shapack, CEO of Shapack Partners.
Asked by Jann to fearlessly offer a 365-day forecast, Fifield opined it’s been “extremely sunny” for eight straight years. Over that time, thousands of residential units have been systematically delivered and absorbed. Noting it may be bright now, “it’s cloudy on the horizon because the units coming online next year will be hard to absorb,” he said.
Flannery dutifully stayed with the weather analogy. “It’s mostly sunny, but bring an umbrella,” he quipped. “[In 2017] we did pretty well in the neighborhoods, with rent growth five percent year over year. But things slowed down quite a bit after Labor Day.”
Paris echoed that observation, noting that while Sedgwick Properties Development experienced a very solid year, concessions started creeping into the market this fall.
Panelists appeared to be in full agreement on the increasing importance of amenities. Tjarksen pointed out the yawning 60-cent-per-square-foot gulf between fully amenitized buildings and those with no amenities. “If you don’t have it, you’re not going to be relevant,” she said, drawing accord from Flannery. “Millennials are moving from building to building to get their two months’ rent concession and the pool,” he noted.
As a trailblazer in the creation of Chicago’s white-hot Fulton Market District immediately west of the Loop, Shapack argued today’s most sought-after renters are not simply seeking building amenities. “I think the amenities of the neighborhood are becoming more important,” he said, noting Fulton Market residents prioritize being “in a neighborhood where four of the five James Beard winners for Chicago are located.”
If there’s one certain harbinger of a bright future, it’s the job growth Chicago has experienced, is experiencing and can anticipate going forward, panelists said. The city is savoring wholesale employment expansion in the West Loop, leads both Houston and L.A. in job growth among workers earning $70,000 or more annually, and is attracting a highly educated workforce. As Tjarksen noted, fully 30 percent of graduates of the traditional Big 10 universities will live and work in Chicago at some point in their careers.
Still, there’s likely to be some rain on developers’ parade over the next half-decade, Fifield predicted. “I think all of us in multifamily building will be building less over the next five years, and may be building different,” he said.