Localism is inevitable sometimes in real estate. But when the topic is huge metro areas, at least some macro trends tend to hold up across different metro areas. The flow of investment capital to Chicago’s downtown office market may not tell much about similar flows to CBDs in Dallas or to New York, but the ways in which capital is matched with office demand are worth study no matter what market you’re in.
This week’s Chicago State Of Office conference (follow the link for a description of the conference panel) took a good look at the Chicago central business district’s sell and buy sides for office square footage.
Panel Moderator Ted Yi (Attorney with Quarles & Brady) asked how the state of Chicago’s and Illinois’s economy was afffecting its ability to compete with other markets. Greg Van Schaalk (SVP, Hines) offered:
“In trying to launch RiverPoint again, which is a million-square foot building on the river that we just started construction on, we spent really the entire year of 2012 trying to find equity to start that building. It’s a $400 million project so we were looking for at least $200 million of equity. We ended up working with Ivanhoe Cambridge out of Canada [EDITOR’S NOTE: Regular readers of The Source will recall this pension giant’s involvement with Silicon Valleys’ recent blockbuster office deal -WG]. 90% of our work was talking to them about Chicago. Chicago was off their list. This is the tenth largest real estate investor in the world. And they are heavy into European cities and the coasts – New York, San Francisco – but Chicago was off their list. So our work was to try to change their perception of Chicago and we were able to do it with facts, with what [Chicago Mayor] Rahm Emanuel has been doing, bringing jobs into the city, and they’ve completely turned around.”
Van Schaalk went on: “That’s just an example of why you haven’t seen new development in Chicago. It’s because the major capital sources believe that there’s fundamental problems here with barriers to entry and overbuilding and things like that. I think that is changing and will continue to change. I think the global capital markets are starting to circle Chicago now.”