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Commercial Real Estate Market Upswing Becoming More Visible in Northern Illinois, RE/MAX Reports
Investors are gaining confidence in commercial real estate across the Northern Illinois region, according to RE/MAX Northern Illinois brokers, who report that sales and leases of commercial properties have been on the rise for the last six months.
The RE/MAX brokers don’t see this as a short-term trend. They predict that a growing number of multi-family, office and warehouse properties will sell or lease across the region throughout 2014 though the retail segment continues to face challenges.
An upswing in commercial real estate activity is good news for the region because it will boost the area’s economic recovery.
Of all the commercial real estate types, multi-family residential buildings continue to attract the most attention -- and dollars -- from investors.
“There is definitely more activity than there was a year ago,” said Brian Haney, a broker with RE/MAX Great American North in St. Charles, Ill., who ranked #2 among commercial brokers in the regional RE/MAX network based on 2013 sales. “Sellers have come to terms with current market prices. They're not overpricing their commercial properties, and that helps to attract buyers and generate more activity.”
Melissa Gray, a broker with RE/MAX One Team in Lemont, said investors in her market are putting more of their dollars into the multi-family segment because those properties are performing well in terms of vacancies and rents. This is a trend that Gray said will only get stronger.
“Supply and demand make multi-family properties the number-one choice for investors,” Gray said. “Landlords are seeing few to no vacancies in these buildings. Interest rates are low. Rents are up. Those factors give investors a high return. They are seeing more money on both ends – the rental income and the actual value of the property.”
The retail market, too, is showing signs of improvement, according to RE/MAX agents. This sector, though, does face an additional challenge: the continued strength of online retailers, which reduces the need for brick-and-mortar stores.
But this challenge does come with a positive; it creates demand for new warehouse space. "Many companies seeking industrial warehouse space to distribute products want spaces that are close to major urban areas," Gray said. "Warehouses are one of the strongest and top-performing spaces I see at this time."
Doug Carroll, a RE/MAX broker with RE/MAX 1st Choice in Ottawa, said that both commercial and residential activity is increasing in his market.
"Last year, we saw our best year here in Ottawa since the really good years of 2006 and 2007," Carroll said. "Overall, we are definitely seeing an improvement in all types of real estate activity. Properties are moving quicker. They're not sitting on the market for a year or longer any more."
Carroll expects an increased level of commercial activity in his market during the rest of 2014 and beyond due in part to the fact that Ottawa recently completed a comprehensive plan for its downtown area. In addition, there have been some significant land sales in the surrounding region, and he believes the potential for new commercial space being built on these parcels is high.
"There's an exciting feeling that something is about to pop here," Carroll said.
That feeling is a common one in the Chicago market, too. Hasani Steele, a broker with RE/MAX Premier Properties in Chicago, said that investors and business owners both are gaining in confidence.
“I am starting to receive more phone calls,” Steele said. “The residential market has been strong for a long time now. It makes sense, then, that activity in the commercial market would start trending higher, too. That’s the way it works: you see improvement in residential real estate first. Commercial follows, and that’s what’s happening today.”
Steele expects commercial activity in Chicago to continue to increase. He’s now seeing more interest from those seeking office space to open their own business.
At the same time, established companies are seeing their own financials improve thanks to the strengthening national economy. As this happens, these companies often seek to expand by opening offices in new markets.
“Companies are more established financially now,” Steele said. “They have had years in which they’ve run their businesses in a lean way. Now they are looking to grow. We are getting more calls from people interested in opening up offices in the city. They are optimistic about the future.”
RE/MAX has been the leader in the northern Illinois real estate market since 1989. The RE/MAX Northern Illinois network, with headquarters in Elgin, Ill., consists of 2,000 sales associates and 100 individually owned and operated RE/MAX offices that provide a full range of residential and commercial brokerage services. Its www.illinoisproperty.com provides comprehensive information about the network and about residential and commercial property for sale in the region. The northern Illinois network is part of RE/MAX, LLC, a global real estate organization with 90,000+ sales associates in 90+ nations.