Chicago’s real estate industry could soon face some scary numbers

Dodge Data forecast calls for drops in multifamily (-24%), health care (-39%) and warehouse (-14%) but an increase in office (+23%)

Jan.January 13, 2020 11:31 AM
New York-based firm Dodge Data & Analytics predicts Chicago’s new construction will fall by 10 percent in 2020 (Credit: iStock)

New York-based firm Dodge Data & Analytics predicts Chicago’s new construction will fall by 10 percent in 2020 (Credit: iStock)

Following the decade-long Downtown construction boom, new projects are expected to significantly slow down this year, particularly in the multifamily and healthcare sectors.

New York-based research firm Dodge Data & Analytics predicts new construction projects in Chicago will dip 10 percent overall in 2020, which would make it the biggest single-year drop since the Great Recession, according to Crain’s. The firm forecasts a 4 percent drop-off nationwide.

This prediction comes despite healthy office leasing, rising monthly apartment rents and industrial demand. But it appears there’s not much more room to grow in Chicago, as developers and investors are increasingly focusing on exploring other markets.

Local developer Golub has been one of the most active firms in the past decade, with projects including the Tribune Tower redevelopment, but it doesn’t plan to break ground on any new projects in Chicago in the next 18 months. Company president Michael Newman told Crain’s that he can’t remember a more challenging time to convince capital partners to back projects in Chicago because they want to wait to see how things shake out.

In December, Real Capital Analytics reported that overall property prices in Chicago dropped by 4.1 percent year-over-year. Prices on residential properties rose just 1.5 percent, well below the 4.9 percent average nationwide, according to the report. It was far worse for commercial real estate, with prices falling 42 percent year-over-year, according to RCA.

In addition to the upcoming presidential election, the threat of new tariffs and trade wars and other macroeconomic factors impacting real estate, local hurdles including uncertainty over property taxes and stricter affordable housing requirements stand to complicate new apartment developments further.

“Chicago is still a relatively healthy market,” Dodge chief economist Richard Branch said. “It just really boils down to that uncertainty causing a bit of a pullback over the levels we’ve seen over the past couple years.”

This year, construction of new multifamily buildings is expected to drop by 24 percent, while new health care will decrease by 39 percent and new warehouse will fall by 14 percent, Dodge determined. On the other hand, the firm projects new office construction will increase by 23 percent.

As the industry waits to see what kind of groundbreaking activity takes places this year, plenty of cranes are still visible throughout the skyline, as some of Chicago’s biggest construction firms work on much-anticipated projects, including JDL’s massive mixed-use development project One Chicago. [Crain’s] — Brianna Kelly

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