real estate market.
Photos: Brian McConkey<@SM>The crowd breaks for some
networking.<@SM>Globest.com content director John
Salustri in a video interview with
Walker & Dunlop's Carolyn McMullen.
CHICAGO-This ain’t your father’s commercial real estate market. That was the key takeaway from the 10th RealShare Chicago Conference, held here yesterday and produced by ALM’s Real Estate Media Group.
Some 250 attendees heard the new gospel of the post-recession era in a theme that carried through virtually all of the sessions. And it carries through as well from tenant demand and capital market flows to the sentiment of foreign investors toward US assets.
Tenant demand is shaking up the way space is viewed. There’s a flight to the CBDs on the part of up-and-coming workers who don’t want the hassle of long commutes; singles, largely who feel the need to be near the pulse of a city.
“This isn’t happening just in Chicago,” said Avison Young chairman and CEO Mark Rose. “It’s taking place across the country.”
Chris Connelly, executive managing director at CBRE, underscored how tenants are also driving the shape of the office: “Hoteling is now a real trend. You can’t have a Great Recession without a seminal shift in the industry. In large part this is being driven by a younger generation that is tech savvy,” and they expect their workplaces to be equally so.
Technology itself is supporting a shift in office design and usage, he added. And what tech didn’t do, the economy did. Users are looking for less space than they did prior to the downturn.
Steve Fifield, chairman and CEO of the firm that bears his name, brought the “miniaturization” theme to the homefront, pointing out that increasingly, the US is taking its cue from Asia and producing smaller apartments. He cited ads he’s seen for 200-square-foot units, and studio apartments that go for $325 a foot.
We’ve come out of the downturn with an increasingly cautious lending community, as Rick Sinkuler, a partner in Ernst & Young’s global real estate markets, pointed out, even though originations are on the rise. He predicted that in coming years, “all deals will be done by non-traditional lenders.”
The United States, always seen as a safe haven for foreign money, is ever more so, according to the Global Markets panel, moderated by Patric Dolan of Reed Midem. And while the coastal cities have always been considered Goal #1 for offshore players, all of the panelists praised Chicago for its “truly global status,” and its ability to draw foreign investment.
As always, RealShare Chicago covered the nuts-and-bolts as well, and an overview of the various market sectors provided a snapshot of where we are now, even though this too brought some formerly niche sectors into the center ring: Data centers are hot in Chicago, but not so much that there’s a lot of spec building in that arena.
“They’re hard to finance,” said Fifield.
“It takes 50/50 debt-to-equity to do one of those things,” added Dan McCaffery, chairman and CEO of his self-named firm.