Browse Tag: greg van schaak

Chicago’s Central Business District: Capital Attraction Against Other Markets

IMAG0649Localism 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.”

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Chicago’s Central Business District: Office Market In A War For Talent

Bisnow 3rd Annual Chicago State of Office

At the Bisnow 3rd Annual Chicago State Of Office conference this week, a strong gathering of commercial RE pros listened to a blue-ribbon panel drawn from around Chicago’s office marketplace to hear perspectives on the local and national economy.  Gathered were:

Demographics And CBD vs. Suburban Office

From the get-go, these professionals of property management and market matchmaking described a Chicago central business district marked by a drive to capture young talent to serve the industries that rent the most CBD  space: legal, technical and professional.  Where’s the demand coming from?

“What we’re seeing quite a bit of at least in the CBD is more or less a war for talent,” said Jim Karras.  “We’re seeing a drive to the young talent, the millennials, as well as trying to secure the baby boomers as well, the empty nesters who are now living in the city.”

Andy Davidson: “Most of the demand is the younger generation, it’s IT, it’s tech,  overall.  A lot of the demand is education, the City of Chicago has a big educational base.”

Some early contention appeared over CBD vs. suburbs.  Andy Davidson was more down on the outlying areas while Jim Karras saw greater stability.  “The only reason the suburbs, I think are doing okay, is that the people who have to go out to the suburbs, the education groups, the hospital groups that have to go out to be near the client.  That’s what I think is holding up the suburbs.  There are big companies that are doing build-to-suits that aren’t lowering the vacancy when they do it, and there’s a lot of old buildings out there that quite honestly at 25% vacancy don’t make any sense to retrofit.  So I’m not as positive.”

Davidson continued on demographics: “You’ve got ahuge trend of people coming downtown, I don’t see that stopping  You’ve got a  generational shift – 10,000 people who are turning 65 every single day. It’s the biggest generational shift we’ve ever had. So companies have got to get downtown, near the young.”

Watch The Source for more coverage of Bisnow’s 3rd Annual Chicago State of Office conference.

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