JPMorgan’s Julie Thick sees strong demand for Class A offices in Fulton Market, suburban warehouses

Newly appointed central region manager talks outlook for office, industrial, multifamily housing markets

Chicago /
Jan.January 25, 2022 03:00 PM

Julie Thick, central region market manager, JPMorgan (JPMorgan, iStock/Illustration by Steven Dilakian for The Real Deal)

Julie Thick, the Chicago native named central region market manager this month at JPMorgan, sees strong investor demand for Class A office buildings in the city’s Fulton Market neighborhood, and for smaller warehouses located close to last-mile distribution centers.

Despite Fulton Market building’s low cap rates, a measure of return on assets, “tenants and investors are focused on Class A trophy buildings that are well amenitized and well located close to the transportation hubs,” she said.

“That’s demonstrated that they’re willing to pay to get into that market,” Thick said. “It’s really a fundamental market and tenants and investors alike are focused on the positive attributes of the market, which has been really exciting opportunities that it has created for our clients.”

In her new role she will oversee customized debt solutions and treasury service products for real estate developers, investors and investment funds across the U.S.

Thick, whose expertise is in commercial real estate, said Chicago’s industrial market is looking for another strong year. Backed by consumers’ e-commerce spending and demand for fast shipping, developers are looking to invest in smaller spaces in suburban markets close to population centers as well as large warehouses.

As a born and raised Chicagoan, Thick hopes to address the workforce housing shortage for middle class households. She also plans to support development in historically underserved communities in the South and West Side through programs including ‘Yield Chicago,’ which pairs emerging developers of color with seasoned ones.

“I’d really love to see us support the next generation of developers and help them increase the overall capacity and benefit from the knowledge and shared resources from seasoned developers.”

Read on for Thick’s outlook on office, industrial and multifamily housing markets and her goals to finance more mixed-income housing developments.

The interview has been condensed and edited for clarity.

What kind of experience do you bring to the job, especially since you have covered the region for a long time including as Director of National Subscription Lending?

I’m a born and raised Chicagoan at heart. I love this city, it’s a true honor to have the opportunity to lead this team in a city that I love and do good work that will impact the Chicago market and beyond. I’ve had one of the most rewarding experiences of my career rebuilding this subscription lending business within the walls of JPMorgan. It’s given me great perspective on the inflows and the outflows of capital into real estate, as well as running a business within JPMorgan.

What are some of the city-specific aspects of the Chicago market?

Our clients are focused in the Midwest, they’re finding growth markets all across the country. In general, we’ve seen some setbacks during the pandemic for commercial real estate. But I think the outlook is overall positive for 2022. There were some of the surprises and negative forecasts over the last couple of years surrounding office and retail. But by and large, we didn’t see the negative impact dramatically affecting those sectors. Industrial and multifamily, on the other hand, have continued to perform really well. One of the areas that we’re focused on is workforce housing. There’s just not enough workforce housing for middle class households (such as homes for) teachers (and) firefighters. So we’re really focused on mixed-income housing developments and putting a lot of effort into combining market rates, affordable workforce all in one project.

You mentioned that the pandemic didn’t negatively impact the office market. Could you explain your rationale?

We didn’t have the gloom and doom, the forecast that everybody’s going to leave New York and you’re never going to see somebody come back (for example). We didn’t see that type of effect happen, where vacancies plummeted. There certainly have been vacancies that have risen since then and Chicago specifically, we’ve certainly seen that impact.

Office leasing activity picked up, but vacancy rates are still far from pre-pandemic levels. How do you forecast Chicago’s office market recovery this year?

Vacancy is at a 10-year high at 15.4 percent, which isn’t necessarily a Chicago phenomenon. Our Class A buildings mirror the national average right now. Sales and leasing activity in Chicago is very location and asset specific. So Class B and C offices are struggling to maintain occupancy right now in the post COVID world, with the tenants and investors alike really focused on those Class A trophy buildings that are well amenitized and well located close to the transportation hubs, particularly in the West Loop and the Fulton Market areas. We’ve seen a lot of high profile departures from LaSalle Street, like Bank of America, BMO Harris, Chapman and Cutler. So that really kind of emphasized that trend. I think occupiers are really in a state of flux about what the post COVID environment is going to look like in the office, depending on which stat you believe. There’s going to be 10 percent to 20 percent of the workforce that won’t come back to an office that will permanently work remotely. But Chicago has been a long time stable office market that has adapted well to the bobbing user trends. That’s really bolstered by the large, diverse talent pool of employees that we have here and diverse set of industries. I think in general, investors are just reticent to make large office investments in any market right now.

We can’t talk about the office market leaving out Fulton Market. What are you hearing from investors, developers about investing in Class A buildings in that area?

Fulton market has certainly been a bright spot in Chicago. Beginning with Google’s decision in 2014 to make Fulton market its Midwest headquarters, that submarket has been incredibly dynamic. Over half of the sales activity in Chicago over the last 12 months in the office sector were three large transactions. Two of them were in Fulton market. They were with Google as the lead tenant in both of those buildings. Their third building was in the West Loop that the state of Illinois is going to use for state employees. Fulton Market’s cap rate was the lowest of any sector at 6.1 percent. Really high sales per square foot at $390, on average. That’s demonstrated that they’re willing to pay to get into that market. It’s no longer seen as pioneering. It’s really a fundamental market and tenants and investors alike are really focused on the positive attributes of the market, which has been really exciting opportunities that it has created for our clients.

It’s been a banner year for Chicago’s industrial real estate. Suburban office tenants are moving out, and some of that space is getting converted into warehouses. What are some other industrial trends you expect in 2022?

As we see e-commerce spending and the demand for fast shipping now really accelerate, so too does the need for those warehouse and distribution facilities. Not just the massive warehouses and old big boxes, but really those smaller spaces in those suburban markets in the last mile distribution and just in time delivery locations. We’re seeing industrial real estate blossom close to large population centers, because they want to be within a certain radius of where the deliveries are going to take place. So I think we expect to see that continue to grow, the sector will continue to see robust activity. I think the complexity for our clients is that it’s such a highly competitive environment right now. So it makes it very difficult to garner the right returns in the sector.

Brokers say there’s a lot of interest in multifamily properties from out-of-state buyers because of the high cap rates that the multifamily properties are generating. Are you seeing enough supply in the Chicago market?

We actually do a lot of multifamily lending at JPMorgan, both through my group and through our Commercial Term Lending team. We’re extremely focused on the multifamily sector. For Chicago, it’s always been a really livable urban environment with diverse employers, varied industries, cultural attractions and a deep pool of talent. So I think those fundamentals have really attracted employees, employers and investors alike. The increasingly high cost of single family homes combined with renters needing more space for that home office really has led to that demand for higher-end rental units. So I think we’ll continue to see that trend play out. The downtown Chicago market, specifically, has experienced really robust demand. What I’ve seen from the distribution is that it’s fairly evenly distributed between local national and for foreign buyers in Chicago. The forecast looking forward over the next five years, according to Costar, shows that supply and demand dynamics should stay in check. So we think it’s going to create some pretty healthy market dynamics and exciting opportunities for our clients.

What would you like to see in the Chicago market as Real Estate Banking Central Region Market Manager?

I would love to see us be able to work with our clients to finance more of those mixed-income housing developments. We have the ability to combine the market workforce and affordable housing in one location. It’s just an important part of addressing the shortage of housing that’s available out there. One other element that we’re proud of, in our support of and hope to continue, is our involvement with the ‘Yield Chicago’ program, which really helps development in historically underserved communities both on the South and the West Side by local developers, specifically developers of color in those neighborhoods. Through programs like that and others, I’d really love to see us support that next generation of developers and help them increase the overall capacity and benefit from the knowledge and the shared resources from seasoned developers and industry professionals that that program provides.





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