In the last few years, the Chicago due diligence market has been a slow moving freight train that comes to a halt at times and waits for a signal.  In 2011, the train has been steadily gaining steam.   As physical due diligence consultants, we are typically hired prior to a property transaction (to do a Phase 1 Environmental Site Assessment, a Property Condition Report, an ALTA Survey, etc.), so our “boots on the ground” perspective offers us a unique view into the Chicago market trends. 

 

Chicago CRE Market Trends

At a recent real estate conference, the following were presented as the prior 12 month rolling averages for downtown Chicago and suburbs real estate statistics. 

  • OFFICE – $3 billion office was traded, 46 properties, at 15,600,000 square feet
  • INDUSTRIAL – $1.2 billion traded, 83 properties, 22,000,000 sf
  • RETAIL – $1.8 billion traded, 82 properties, 10,400,000 sf

 

So far in 2011, Partner has completed over 250 due diligence projects in the City of Chicago and the Chicago suburbs with the ratio of property types similar to the above Chicago market statistics.  Our projects are coming from large financial institutions;  small business banking groups; national restaurant chains and other retail investors; and large publicly traded REITs investing in office, light industrial, and senior living.  Our Chicago area work over the last year has been typical of property transactions (Phase 1 Environmental Site Assessments, Phase 2 Subsurface Testing, Indoor Air Quality Sampling, Lead and Asbestos Testing and Mitigation), but also of construction projects (Construction Progress Monitoring and Erosion Control).

These are signs of momentum.   Multi-family, medical offices and senior living are powering the train. The multi-family rental trend will continue with the stubborn high unemployment rate, and young professional’s reluctance to buy.  Medical office is on many investors’ radars including the hospitals themselves who continue to be in a land grab for physicians and their clinics.  Senior living in the form of assisted living and skilled nursing facilities will be strong for years to come with our aging society.  

There is optimism in the Chicago urban real estate market with the growing sentiment that core investors’ next stop is the Chicago market as the coastal U.S. markets have been saturated.  In downtown Chicago, there are unlimited 15,000 sf value property leasing options, but very few high quality 200,000 sf office spaces to be had with the lack of new development.  The core investors may be ready to seize on this opportunity as large corporations that once fled to the suburbs are now coming back downtown because of tax breaks and access to the young professional talent pool.  

 

Chicago Due Diligence

Doing physical due diligence in Chicago is a bit unique, and it helps to have local staff that are familiar with the local regulations and common environmental concerns.

For example, Chicago has some particular requirements with respect to building fa