Real estate reacts to Chicago’s mayoral runoff

Chicago’s real estate professionals are yet to come to a consensus on whether to embrace or fear their choice for the city’s next mayor after Tuesday’s election narrowed the field to Paul Vallas and Brandon Johnson, who will head to a runoff.

Some are confident in Vallas — a former Chicago Public Schools CEO who drew much of his financial support from the business community. He made the cut as the top finisher in the initial round of voting with 34 percent.

“It’s going to be a brutal five weeks to tell you the truth,” said Paul Colgan, lobbyist for the Building Industry Association of Greater Chicago. “Vallas has shown himself to be sympathetic to the needs of the building industry and Johnson has staked out positions on rent control, higher taxes, a lot of different things that are not favorable to the building industry.“

While his association hasn’t made an official decision on an endorsement yet, he expects most of its members to support Vallas.

“I think Vallas can breathe new life into Chicago commercial real estate,” said Darren Sloniger, CEO of development firm Marquette Cos., which builds apartment complexes in Chicago and its suburbs. “I think he would be taken the most seriously as a qualified leader that will help Wall Street trust Chicago again.”

However, some are disappointed he doesn’t have a more moderate opponent than Johnson, who captured 20 percent of the vote to make incumbent Lori Lightfoot, with 17 percent for a third-place finish, Chicago’s first one-term mayor in 40 years.

“Terrible. Last night was very bad,” said multifamily investor and broker A.J. Manaseer, who followed the election closely and supported Vallas but opposed Johnson. He flirted with the idea of casting a vote for Lightfoot yesterday to ice Johnson’s chances for a runoff, who he views as too progressive. He now wishes he and other voters did just that.

Change is certain. The outcome of the April 4 runoff could have tremendous impacts on the city’s real estate prices and return to office initiatives, given Johnson’s support for a raising property transfer taxes and a new tax charged to large employers based on how many workers commute into the city from the suburbs.

There’s also uncertainty if a program Lightfoot devised last year to revive LaSalle Street and the Central Loop by converting offices into apartments will continue. The outgoing mayor promised public funding could support proposals dedicating 30 percent of their units to affordable housing. Will the next mayor honor that?

“Ultimately, it will boil down to whether or not city council is supportive of the [LaSalle Street Reimagined] initiative,” said Quintin Primo, who has partnered with Mike Reschke on a bid to convert much of the office building at 111 West Monroe Street into 349 one- and two-bedroom apartments, 105 of them affordable, in a $180 million project. “I don’t have any special insight there. But if it is to get done, it will necessarily take strong advocacy from the mayor’s office.”

Real estate professionals are hedging their bets, though, as they want to be in the good graces with whichever candidate comes out on top. There’s also a common notion that Vallas and Johhnson have resumes that qualify them for the job.

Primo also said both Johnson and Vallas are “certainly qualified for working effectively within the system of municipal government.”

The two candidates could also moderate their policy positions to gain the support of voters who broke for one of the other seven who ran but missed the runoff.

Colgan noted that Johnson has eased some of positions, including telling Chicago’s CBS station that an additional Metra surcharge tax on commuters into the city — a separate proposal from the so-called “head tax” on employers with workforces who commute from suburbs — was no longer being considered.

“Johnson has taken some very definitive stances that are frankly negative or very harmful to the real estate community,” Colgan said. “He’s been backing off some of that stuff, he’s trying to moderate his points of view.”

Check back for updates on this story throughout the day as The Real Deal reports on the reactions of real estate professionals to Chicago’s mayoral runoff.