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Occupancy is at its lowest level since at least 1998, dragged down by the pandemic. But step into the suburbs and it's a different world entirely. By: Alby Gallun As downtown apartment landlords struggle through the worst market in decades, it's sunshine, lollipops and rainbows in the suburbs.
The downtown occupancy rate fell to 87.1 percent in the third quarter, down from 93.8 percent a year earlier, according to the Chicago office of lntegra Realty Resources, a consulting and appraisal firm. The rate has never been that low in the 22 years since the firm's executives began tracking the downtown market. To attract tenants, downtown landlords have slashed rents, which fell 18 percent to 23 percent, depending on market segment, from third quarter 2019. "Some (landlords) are saying they can't remember it ever being this bad," said Ron DeVries, lntegra senior managing director. The coronavirus pandemic and civil unrest over the summer have reduced the appeal of high-rise living across the country, and with so many people working from home, fewer are renting apartments to be near a downtown workplace. That has turned out to be a bad combination for landlords-but a good one if you're in the market for a new pad. Downtown rents are down about $500 across the board, DeVries said. Step into the suburbs and it's a different world entirely. The suburban apartment occupancy rate rose to 95.3 percent in the third quarter, up from 95.1 percent in the second quarter and 95.0 percent a year earlier, according to lntegra. The median net suburban rent was $1.53 per square foot in the quarter, versus $1.54 in the second quarter and $1.48 a year earlier. The forces that have depressed demand for apartments downtown - corporate work-from-home policies and the decline in people seeking out dense, urban living - have had little impact on the suburban market. "It's like no market event has happened there," DeVries said. A TALE OF TWO MARKETS While the suburban Chicago multifamily occupancy rate has inched higher this year, the rate for Class A downtown apartments has dropped to its lowest level in more than two decades. Suburban rents have held steady, but downtown Class A rents have plunged to 2013 levels. With coronavirus cases surging and the leasing entering a seasonally slow period, DeVries expects the downtown market to fall further. But recent news about promising COVID-19 vaccines offers hope that it could begin to recover next summer. Though vaccinations will take time, they'll eventually allow companies with downtown offices to call employees back to the office. If people are working downtown, they're more likely to live there. "When are employers going to start bringing people back?" DeVries asked. "Because that's really going to drive demand." If the vaccines "turn out to be successful, I think things could turn around on a dime," he said. Still, DeVries expects the downtown market won't come back fully until the spring of 2023, more than two years from now. It has fallen hard: Including concessions, the average rent at Class A buildings-the fanciest and most expensive of the bunch-fell to $2.53 per square foot in the third quarter, down 18.4 percent from a year earlier, according to lntegra. The last time the average Class A rent was that low was in late 2013. The average Class Brent fell even more: 23.3 percent, to $2.07 per square foot where it was in 2011. One key measure of demand, absorption-or the change in the number of occupied apartments-has slipped into negative territory after expanding for several years. Downtown absorption totaled -531 units in the quarter, and lntegra forecasts absorption for the year will drop to -1,300 units, the first year of negative absorption since 2005. With numbers like that, some landlords could wind up defaulting on their debt. But Devries said he doesn't expect widespread distress downtown because most properties aren't carrying too much debt, and lenders, sensing a recovery on the horizon, will be flexible with borrowers. "There's got to be motivation to wait it out," he said. Apartment development has slowed to a crawl downtown, but some developers are moving ahead with projects, betting that the market will be much stronger when they finish them. Marquette, a Naperville-based developer, recently broke ground on two apartment buildings totaling more than 500 units on the west end of the Fulton Market District. ''There's lots of tire-kicking in the city," said Damian Eallonardo, senior vice president of operations at W.E. O'Neil Construction. "I don't think any developers have given up on it. They're just moving more cautiously." But they're still pretty busy in the suburbs, he said. Chicago developer John Murphy recently restarted construction on a 153-unit apartment project in downtown Skokie that O'Neil is overseeing as general contractor. "We're still seeing a fair amount of activity" in the suburbs, Eallonardo said. Outside of downtown, many landlords that cater to lower- and moderate-income tenants have had a hard time collecting rent as the coronavirus has put many people out of work. But the market for apartments in many Chicago neighborhoods is holding up for the same reason the suburbs are, DeVries said. Though lntegra doesn't publish data on neighborhoods, it performs consulting assignments in them. "People aren't leaving the city of Chicago," Devries said. "They're leaving density."
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By the Business Facilities Staff The 18th largest economy in the world, Illinois has grown and attracted some of the most innovative and iconic companies on the planet—including Amazon, Caterpillar, Boeing and Wrigley Company—thanks to its many advantages for business and talent.
Among the state’s greatest assets are its talent pool of nearly 6.5 million people and one of the finest transportation and logistics networks in the country. Tax credits are offered by partners at the state and local level to select companies considering alternative locations. Home to more than 200 higher education institutions, Illinois continues to fuel one of its greatest assets for business: its diverse, skilled and hardworking workforce. About a third of the state’s talent pool hold a bachelor’s degree or higher, which exceeds the national average. That’s thanks to Illinois’ top-notch higher education institutions, which produce 10 percent of the nation’s computer scientists and graduate more engineers than MIT, Stanford and Caltech combined. It’s no surprise that the minds behind YouTube, Oracle, CDW, PayPal and Tesla Motors are graduates of Illinois schools. More than just highly educated, in the spirit of the famous Midwestern work ethic, Illinois’ workforce is characterized as loyal, hardworking and honest. Illinois’ more than 200 higher education institutions include some of the top colleges, universities and graduate programs in the nation. The private University of Chicago ranks third on U.S. News’ 2018 Best National Universities list, while Northwestern University and the University of Illinois host engineering programs among the country’s top 15. Many of these institutions partner with businesses and incubators to create custom skills-training programs, such as the UIUC Research Park, Argonne National Laboratory and the Illinois Science and Tech Park. The state’s more than 80 nationally ranked public high schools ensure that the workforce pipeline is continually growing. One of the top states for manufacturing in the nation, Illinois boasts a rich history of industrial excellence that has evolved into an advanced, technology-driven sector. Illinois manufacturing companies benefit from low energy rates and deregulation as well as a low-cost, high-quality water supply—not to mention the state’s central North American location and world-class air, passenger and freight transportation network ARLINGTON HEIGHTS: GROWING AND THRIVING Arlington Heights is a growing, thriving community just northwest of Chicago, home to nearly 76,000 residents with an average household income of over $110,000. One of the largest business communities in the Chicago region, Arlington Heights is home to nearly 3,000 for-profit companies and over 50,000 daytime workers. Arlington Heights’ position in the Chicago market is second-to-none. Two Metra commuter rail stations connect the community to Downtown Chicago and a host of other northwest suburban municipalities. Arlington Heights also is directly served by three interstate highways: I-90, I-290 and I-355, and conveniently located only 15 minutes from both O’Hare International Airport (ORD) and Chicago Executive Airport. Connectivity to three interstate highways allows Arlington Heights incomparable positioning within the Chicago metropolitan area and access to logistics by air and ground transport. Arlington Heights also is a great corporate destination. In 2016, HSBC relocated their Chicago area offices to the community, bringing 1,500 jobs and re-occupying over 160,000 square feet of formerly vacant space. Other major companies such as Amazon, GE Healthcare, Northrop Grumman, AT&T and Paddock Publications (which publishes The Daily Herald, one of America’s 75 largest newspapers by circulation) employ hundreds within the community. Retail also thrives in Arlington Heights. In 2019, the municipality conducted over $1.27 billion in retail sales. Rapidly-growing grocery chain Mariano’s, which now boasts over 30 locations throughout the greater Chicago metropolitan area, opened its very first store here. Arlington Heights also is an attractive location for industry. The West O’Hare Commerce Center is a two-phased 330,000-square-foot spec industrial facility less than a mile from I-90 at Arlington Heights Road, that is host to multiple growing companies like Taiki USA and AVI Systems. Other established businesses continue to call Arlington Heights home. Arlington International Racecourse is one of the world’s premiere horse racing venues. It has been the home of the Arlington Million, one of thoroughbred racing’s richest events, since 1981. The recently-renovated Mitsuwa Marketplace is the largest Japanese grocery store in the Midwest, serving as a destination for patrons throughout the Chicago area and servicing a large tourist population. Arlington Heights remains a target of significant development. Arlington 425, a mixed use development in the Downtown that will offer 361 new apartments and 35,000 square feet of commercial space is approved and anticipated to begin construction in 2021. The Arlington Downs project is an exciting addition to the Chicago market. When complete, the $250 million mixed-use development will boast nearly 1,000 residential units, a 115-room hotel, as well as retail, restaurant and entertainment space. Set on over 27 acres of land, the development has immediate access to three interstate highways, and will be a unique Chicagoland destination. The project is being developed in phases. The first phase, One Arlington Apartments, was recently completed and hosts 25N Coworking, a 15,000 square foot private and shared workspace venue. Phase 2, a 263-unit luxury apartment development currently is being completed. As part of the community’s efforts to grow and support commerce and industry, Arlington Heights offers a Zero Interest Loan program available to both new and existing businesses. Interested business or property owners can apply for an interest-free loan of up to half their project cost, capping at $20,000. Eligible expenses range from the purchase of new equipment to technology upgrades to improvements of existing facilities. Retailers also are eligible for the Small Business Sales Tax Rebate program. New and growing retailers in Arlington Heights can receive a rebate of up to 50 percent of the local sales tax that they generate to reinvest in their business. Arlington Heights offers an exceptional quality of life, starting with education. The community features five schools that have been awarded National Blue Ribbons in the past 10 years, while Robert Morris University offers a satellite campus in the community as well. The Arlington Heights Memorial Library is regularly ranked among the nation’s best public libraries for its size and has been given “five stars” by Library Journal, the publication’s highest rating. The community also is served by the Arlington Heights Park District and its 50+ public parks, as well as Northwest Community Healthcare which continues to expand its operations and services and was named by U.S. News and World Report as one of the 15 best hospitals in the state of Illinois. Arlington Heights features a unique, vibrant and award-winning Downtown offering an enticing urban lifestyle with single-family and multi-family living, and more than two dozen shops and boutiques. It is home to nearly 40 one-of-a-kind ethnic and individually-owned restaurants. Downtown Arlington Heights also is a Chicago area destination for entertainment, hosting outdoor concerts and year-round events. Other local venues include Hey Nonny and Big Shot Piano Lounge, two great spots for live music and elegant dining in classy and cozy environs. Meanwhile, the Metropolis Performing Arts Centre offers top-notch concerts, comedy and live theater in an intimate setting. With an exceptional quality of life, wealth of amenities and unparalleled access throughout the Chicago area, Arlington Heights is primed to continue to grow and thrive. For more information, visit www.discoverarlington.com. WHEELING: PRIME LOCATION FOR GROWTH Wheeling is a growing and prosperous community of 40,000, distinguished by its unique balance of industrial, commercial and residential developments. Encompassing a blend of national retailers, restaurants, corporations and independent family-run businesses, Wheeling is known regionally for its “Restaurant Row” district along Milwaukee Avenue, which features an eclectic array of dining and entertainment options for residents and visitors. Wheeling also is a member of the Chicago North Shore Convention & Visitors Bureau, which markets Wheeling’s dining and hospitality offerings. With all of these great facts presented, below is a highlight for some of the noteworthy projects that have taken advantage of Wheeling’s desirability. The new $110 million Wheeling Town Center is located in the heart of Chicago’s prestigious northwest suburbs. This transit-oriented development serves as Wheeling’s downtown, adjacent to the 100-acre Heritage Park, Wheeling Metra Station and municipal campus. Over 1,000 luxury apartments are within walking distance of the Wheeling Metra Station. The Wheeling Town Center features 301 luxury apartment units and 100,000 square feet of retail space anchored by a movie theater, signature restaurants, fast-casual restaurants and specialty stores. The project is a joint venture between WTC, LLC and the Lynmark Group. A few remaining parcels are available for lease. Directly north of the Wheeling Metra Station, Uptown 500 is near completion. This transit-oriented, mixed-use development includes a 321-unit luxury apartment building and 12,000 square feet of ground floor retail. Residential leasing, which began in early 2020, is off to a strong start. The units have been attracting young professionals, while also catering to a growing interest for those downsizing and looking for maintenance-free residences close to the train station, restaurants and service amenities. Northgate Crossing, which is immediately north of Uptown 500, was completed in 2017, and features nine three-story buildings with 32 units per building, as well as attached garages, a clubhouse, walking trails and other amenities. These projects complement the community’s Downtown Station Area Plan, which calls for a concentration of multi-family housing along with mixed-use commercial and residential development in proximity to the Wheeling Metra Station. As Village President Pat Horcher says, “The mission of the Village of Wheeling is to provide all residents and businesses of the community with high quality public services. The Village Board has been very aggressive with business attraction programs and business incentives for new, large-scale development.” Less than a mile west of the Wheeling Town Center, a new development will be taking shape. London Crossing will be developed by Wingspan Development Group and will include 55 row homes and approximately 33,000 square feet of commercial/retail space. According to Vice President of Development Christopher F. Coleman, “Residents will enjoy the proximity to employment, shopping and dining. When you combine a great location with great design and great Village support, you get a great outcome.” With these major projects at various stages of development, the Wheeling community continues to experience growth. The Village of Wheeling is working proactively to secure more projects and businesses to serve its residents, visitors, surrounding communities and the existing business base. Wheeling’s Village Board recognizes the contributions made by its businesses and the partnership that is required between the Village and its business community. A major element that differentiates Wheeling from its neighboring northern and northwest Chicagoland communities is that it co-owns the Chicago Executive Airport. The corporate aviation business at Chicago Executive Airport is experiencing an economic boost as new hangar facilities and other amenities are being constructed, including a U.S. Customs Office. Immediately west of Chicago Executive Airport, the Panattoni Development team was drawn to the proximity of the Airport. The $13 million project broke ground in June 2019 and the 162,000-square-foot spec industrial is near completion. The developer is targeting distribution, warehousing, logistics and light manufacturing uses for the property. With a low industrial vacancy rate, the new development will attract tenants looking for modern buildings. Wheeling contains nearly 14 million square feet of industrial space and one of the top manufacturing employment concentrations in the state of Illinois. Economic Development Director Patrick Ainsworth stated, “Watch Wheeling continue to capture new business and development projects as our geographic location, the skilled and educated workforce, our commitment to exceptional service and our passion to work with everyone all comes together to make this the best community to build, invest, open and thrive in. While we have a lot of great projects taking place, there are various opportunities for new investment that exists throughout the Village.” Wheeling’s strategic location, the Village Board’s pro-business commitment and economic development incentives place Wheeling in a position to continue to thrive. For more information, visit www.wheelingil.gov/business. |
AuthorChris Coleman, VP of Development at Wingspan, periodically shares his thoughts and observations on property development news. 
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