Construction activity in Chicago declined in 2023.
Combined, the city’s top five contractors booked $931 million in work from March 10, 2023, to March 10, 2024, a significant decrease compared to The Real Deal’s ranking last year, when the top five raked in more than $2 billion.
While the megaprojects that dominated TRD’s 2022 contractor rankings dropped off this year, Chicago’s ecosystem of mid-market properties kept the industry afloat.
Executive Construction topped this year’s list, bringing in about $219 million of work. The Hillside, Illinois-based firm secured about $20 million more than runner-up Power Construction. Power, based in Chicago, dominated the prior year’s ranking with $1 billion worth of work between March 2022 and March 2023.
“High interest rates, weak demand for office space and higher construction costs have caused private development projects to slow down significantly,” said Skender President and CEO Justin Brown. “Ground-up commercial buildings will continue to be difficult to pencil out and finance.”
Brown’s firm ranked fifth in the city this year, bringing in $165 million worth of new work. The firm’s top permit was for $27 million worth of work for an expansion of the Greater Chicago Food Depository.
In another sign of the market slowdown, most of the city’s costliest permits of the year were for renovations rather than new construction.
“In workplace interiors, we see steady opportunities for professional and financial services, banks and law firms, filling the gap left by a slowdown in tech interiors,” Brown said. “We still see the ‘flight to quality’ trend among office tenants looking for high-end finishes and curated amenities.”
Executive Construction nabbed one of the top jobs of the year with $88 million to continue work on Sterling Bay’s 360 North Green office building. The Fulton Market property broke ground in 2022 and is set to be completed in 2024. It already has high-profile anchor tenant Boston Consulting Group lined up; the firm will use the building as its headquarters.
Another bright spot was the construction of the life sciences facility Hyde Park Labs, at 5201 South Harper Avenue. Power Construction’s permit for $109 million worth of work on the project site was by far the firm’s biggest endeavor of the year in Chicago. Its next largest permit issued in Chicago was for $9 million worth of interior work at 400 North Aberdeen, another life sciences building.
Despite Chicago’s overall downturn, construction volume grew in the broader region, with a boost from the construction of manufacturing facilities. Construction volume in the region increased by 5 percent in 2023, according to construction consultancy Cumming Group.
Across the state, Skender had its best year yet, Brown said. The firm brought in $560 million in revenue, finished 129 projects and completed 629,000 work hours in Illinois.
Some of its top projects fell just outside of Chicago’s city limits, in Oak Brook, Bloomingdale, Downers Grove and Harvey. They include the new Ace Hardware headquarters, a golf performance center and a senior housing facility, among other large scale projects. The company’s success, Brown said, comes from taking on a variety of project types.
There is more room to run in the broader region. Cumming Group expects manufacturing facility construction to grow by over 60 percent by the end of 2024.
Manufacturing had a strong year in TRD’s last ranking as well. The $162 million project for Chicago’s first multistory warehouse at 1237 West Division Street took the top spot for the priciest project permitted in 2022. Walsh Construction is the general contractor for the project by developer Logistics Property Co.; the 1.2 millions square-foot facility is located near Goose Island at the intersection of Division Street and Elston Avenue.
But the manufacturing market could be oversaturated soon. A result of pandemic-driven demand and low interest rates led to a proliferation of big-box industrial developments hitting the market at the same time.
The amount of industrial space entering Chicago’s industrial market in the third quarter of 2023 — 12.8 million square feet — was the highest since 1999, according to JLL.
Meanwhile, commercial construction was expected to fall by about 2 percent and residential by 12 percent.
Certain geographic areas show promise for contractors, perhaps more than specific sectors of real estate such as manufacturing.
Southside Builders Association President Andy Schcolnik said that he has never been busier because he focuses on acquiring and renovating mid-market properties on the South Side.
“Bronzeville has seen a revival in the last few years and it just keeps going,” he said. “You have million-dollar homes there, which 5 to 10 years ago would have been inconceivable.”
Areas just south of the lakefront neighborhood are heating up too, he said.
“If you got to Woodlawn, that’s one step behind Bronzeville,” he said.
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