While some in Chicago’s real estate industry may view this ranking as confirmation that high taxes and crime keep investors away, this ranking says more about Chicago’s status as a mature market. may be talking about According to the report, it’s part of the “Establishment,” a group of 20 metropolitan areas that includes New York and Washington, “that have long been the driving force of the nation’s economy.”
On the other hand, many Sunbelt cities are “magnet” markets and “destinations for people and businesses” with strong growth characteristics that attract investors and developers. Geographical disparities are striking. Of the top 10 markets in the report, only Boston is in the northern United States.
PwC and the Urban Land Institute publish the 109-page report, the 44th annual “Emerging Trends” survey, based on survey responses and interviews from investors, developers, fund managers, brokers and other real estate professionals. did. This report identifies 10 key trends impacting real estate in 2023. No 1: A market slowdown is looming amid rising interest rates and a possible recession.
“These conditions will pose problems for the real estate market. Slowing or declining economic growth will reduce tenant demand and rising interest rates will increase the cost of developing or acquiring properties,” the report said. increase. “Both factors will reduce returns and depress values. In fact, rising interest rates and uncertainty over future market conditions are already driving the deal as sellers are not prepared to bow to buyers’ growing demands for price concessions. are killing.”
Local interest rates are already rising Squeezing Some properties, like Willis Tower and Oakbrook Center Mall, are financed with variable rate loans. Investors are struggling to complete acquisitions amid rising borrowing costs and tightening lending standards. on hold In “economic pressure”.
The Emerging Trends report also explains the lingering impact of the COVID-19 pandemic. Shoppers have returned to brick-and-mortar stores, but online retail has taken hold, “ultimately meaning fewer shopping centers and retail spaces will survive.”
Business travel has also picked up, with more professionals returning to the office, according to research, but hotel and office investors shouldn’t expect demand to return to pre-COVID levels. Converted to apartments and other uses.
“The pandemic is structuring the way and where we live, work and recreate in ways that seem destined to be at least somewhat bearable, if not as extreme as our behavior during the peak of COVID. It has forced dramatic changes,” the report said.
The study divides the 80 US real estate markets into four broad categories. Established; niches include cities such as Chattanooga (65th), Las Vegas (21st), and Pittsburgh (41st). The backbone includes Albuquerque (72nd), Milwaukee (75th), and Louisville (63rd).
Magnet has attracted the attention of Chicago investors and developers, including Sterling Bay, which has projects in Miami, Atlanta and Dallas. Meanwhile, the Magellan Development Group has been busy in recent years in Nashville, Miami and Austin.
Chicago is home to many top performers in established categories, including San Francisco (58th), Manhattan (27th) and Los Angeles (20th).
“Although growing more slowly than the magnet market, the established market still offers great opportunities,” said the report. “The average rating for this group puts him second among the four major groups. These markets are becoming less attractive to developers.”
The report also classifies Chicago, San Jose, Los Angeles, and Seattle into the subcategory of “multi-talented producers,” reflecting their large and diverse economies.
“The high cost of doing business and completing transactions has limited their appeal to some real estate professionals, yet versatile producers continue to attract a disproportionate share of investment dollars. ,” said the report.
While the report doesn’t elaborate on Chicago’s shortcomings, local business leaders, including McDonald’s CEO Chris Kempczynski and Citadel CEO Ken Griffin, have been outspoken about Chicago’s crime rate. , Griffin, who once described Chicago as “like Afghanistan on a good day”, announced plans. move the citadel to Miami.
of Boeing and Caterpillar departure In addition to the talk that Chicago isn’t good for business, rising Cook County real estate valuations aren’t helping the city’s image with investors either.
Whether locating capital in Chicago or an attractive location like Nashville, investors should lower their expectations for 2023 as interest rates rise and the economy weakens. there is. After all, real estate is a cyclical business. The “Emerging Trends” survey summarized the outlook with a quote from an unnamed developer.
“With all this stimulus and cheap debt, we are feeling a little sugary. It will slow down,” the developer said. “We need this normalization. So what does that mean? I think it’s going to be a little bouncy;