Cawley Chicago’s commercial real estate experts specialize in two sectors within the market: industrial and office real estate. We asked a few of our team members from the respective teams to provide their outlook for this coming year, 2021.
While it is evident that the pandemic has taken and is taking its toll on economic markets globally, there is a lot of optimism for Chicago’s commercial real estate sector heading into the new year. In particular, Chicago’s industrial real estate market is being benefited by the necessity for more warehouse space in order to have the logistics infrastructure to meet the growing demands for e-commerce. Concurrently, Chicago’s office real estate market still has much to offer despite the move to teleworking and social distancing regulations at the workplace.
Below are the insights provided directly from our CRE experts regarding the real estate market this coming year.
Chicago Industrial Real Estate Outlook 2021
“The fastest moving industrial facilities in the market are buildings less than 50,000 sf that include trailer parking and the potential for truck maintenance. With the cost of capital remaining historically low, a lot of local and regional business owners are electing to purchase their next facility as opposed to leasing.
Also of note, those same companies looking to purchase facilities are typically avoiding Cook County, unless their business dictates them being there. Assuming loan rates stay low, local and regional companies will continue to pursue the purchase of facilities that can accommodate their projected growth for the next few quarters.”
– Matt Garland, Vice President
“Overall, activity is up. Most developers are still bullish and willing to go after new projects since absorption is outpacing vacancy in most markets.
Vacancy rates in the I-55 & I-80 corridor finally dipped down into single digits, with I-80 seeing a whopping 9+ mill SF of absorption alone in the last 12 months. Right now we are seeing a bigger gap in price developing between class B/C properties and Class A properties. B & C properties are still getting attention, but people aren’t fighting for them like they are with Class A properties.”
– Joshua Hearne, Principal
Chicago Office Real Estate Outlook 2021
“While sentiments are that most are glad to have 2020 over, there were some positive signs leading us into 2021. The Chicago neighborhoods continue to see an uptick in market activity, with new lease and acquisition requirements.
Activity is not anticipated to immediately come back to normal. However, we are anticipating a strong push by Q2 and Q3 of the upcoming year. We are continuing to see businesses look for safe and efficient ways to get employees into their work environment, and options within the Chicago neighborhoods, outside of the downtown CBD area, are providing solutions for doing so.”
– Zach Pruitt, Managing Principal
“Client activity has been up since the end of 2020 and we can expect this trend to continue into the New Year. It is likely that several companies will continue to allow their employees the flexibility to work from home as they monitor the progress of the vaccine.
Long term, this is likely to create an office hybrid model where employees are in the office some days and working from home on others. Many companies that had leases expiring during the pandemic optioned for short term renewals so they could better evaluate the situation next year. With those leases rolling in addition to the leases already set to expire in 2021 we expect to see increased activity with a lot of rightsizing.
Some companies may elect to grow in order to correctly space out their employees while others will downsize to accommodate the new work from home hybrid model. The demand for office space still exists, however the way in which the space is utilized will be altered. Many employees do want to get back to their offices, as social interaction is a huge benefit to collaboration.”
– Justin Harris, Senior Associate