More than 60 percent of real estate professionals with ties to ULI Chicago and The Real Estate Center at DePaul University are concerned or trending toward concerned about Chicago’s real estate markets. That concern—driven by the direct and indirect impacts of the novel coronavirus (COVID-19)—leads them to predict an elongated, Nike Swoosh shaped recovery.

According to the Third Annual Mid-Year Perspective on Chicago Real Estate Markets produced by The Real Estate Center and ULI Chicago, 40.3 percent of survey participant are concerned, 20.4 percent are trending toward concerned. At the same time, almost one third are either optimistic or trending toward optimistic.

“COVID-19 has dealt every market across the country a set of challenges and circumstances no one could have anticipated,” says Charles Wurtzebach, Douglas and Cynthia Crocker Endowed Director, the Real Estate Center, DePaul University.  “Yet people want to be optimistic; they are tired of COVID and want it to be over.”

Other findings of the DePaul-ULI Chicago Report include:

• The greatest concerns among real estate professionals are the pandemic’s unknown duration/ severity of return followed very closely by the economic pressures on local and state government;
• The greatest threat to a vast amount of real estate in the Chicago area is the continued uncertainty of Cook County property taxes, with many also highlighting City, State and County financial issues;
• Experts anticipate a variety of post-Pandemic office configurations, as employers embrace work from home (WFH) strategies while looking to ensure productivity and sustain company culture;
• More than one third of participants believe there will be a modest shift in investments to the suburban markets.

Outlook

“We’re in a severe economic recession. The question everyone wants answered is how long does that last; and we don’t know,” says Keith Largay, Senior Managing Director & Chicago Office Co-Head, JLL. “It’s hard to predict the outcome and unintended consequences of 40 million job losses and the stress it puts on the balance sheets of people, companies, and governments.”

Broadly speaking, investors are getting ready, but are not in a rush, to place capital as long as the situation is right. Many investors are looking at defensive options like debt positions where there is a layer of equity as a buffer just in case valuations are not correct. Others want a mix of defensive and offensive options, so they are looking at opportunistic investments that take on more risk.

“Buying during a recession tends to create good outcomes. But we’re in the early days of a recession unlike anything we’ve seen before,” says Mary Ludgin, Senior Managing Director, Head of Global Research, Heitman. “There are lots of chapters to this story. We’re in chapter one or two of maybe a six- or eight-chapter book.”

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