The theme of this year’s Chicago Commercial Real Estate Forecast Conference was a simple but powerful one: Commercial real estate professionals should be happy that they do business in Chicago.

Illinois Real Estate Journal’s 23rd annual Chicago Commercial Real Estate Forecast drew more than 450 attendees to the Hyatt Regency O’Hare hotel in Rosemont on Jan. 24.

And why wouldn’t it draw a crowd? This event features insights from the biggest names in the Chicago-area commercial real estate industry each year. This year was no exception.

State of the Market panel: Boosting the power of Chicago

State of the Market panelists: Meredith O’Connor, International Director, JLL; Steven D. Weinstock, Senior Vice President/Regional Manager, Marcus & Millichap; Charley Margosian, Jr., Managing Principal, Owner, Highland Management Associates; Marcia K. Owens, Partner, Honigman LLP; John Joyce, Managing Director, SVN Chicago Industrial; Carrie Szarzynski, Senior Managing Director and Head of Management Services, Hiffman National; Joe Rook, Executive Vice President, ARCO/Murray; and Ken Witkowski, Senior Vice President, Calamos Real Estate.

Consider the State of the Market panel that kicked off the event. Moderated by Marcia Owens, partner with Honigman LLP, the panel featured a roster of big names in the industry:

• John Joyce, managing director with SVN Chicago Industrial
• Carrie Szarzynski, senior managing director and head of management services with Hiffman National
• Meredith O’Connor, international director with JLL
• Steven Weinstock, senior vice president/regional manager with Marcus & Millichap
• Charley Margosian Jr., managing principal owner of Highland Management Associates
• Joe Rook, executive vice president of ARCO/Murray
• Ken Witkowski, senior vice president with Calamos Real Estate.

These panelists were optimistic about the state of the Chicago-area commercial real estate market, with some reservations.

Joyce kicked off the panel by stating that the Chicago commercial real estate market is now in recovery mode after several challenging years.

“We saw a sharp dip of commercial real estate activity in ’23 and ’24,” Joyce said. “But the beginning of this year, so far, is shaping up nicely. I am optimistic about what lies ahead. I think that we are in a great space today.”

Weinstock agreed, and added that Chicago remains a great place for CRE professionals to do business.

As Weinstock said, it’s important to remember that Chicago is the third-largest city in the United States and that it is a hub of business and commerce. He said that of the closings that Marcus & Millichap handled during the last five years in the Chicago market, 47% featured out-of-market buyers hoping to take advantage of the opportunities here.

“All cities have issues. Chicago has issues,” Weinstock said. “But we are doing business here in Chicago. We provide really good returns for investors. It’s up to us to tell the rest of the world how well Chicago is doing.”

O’Connor pointed to good news in the industrial sector, saying that this area of commercial real estate remains resilient and is poised for several big years.

“We are seeing the beginning of a manufacturing renaissance,” O’Connor said. “We are so excited about this at JLL. Economic development is non-partisan. Everyone supports new jobs and capital investment, and that’s what an increase in manufacturing will bring.”

Margosian cited another reason for optimism, the performance of the retail sector.

As he said, retail is no longer the commercial sector that everyone looks down on.

“Retail is no longer the bastard stepchild of the real estate world,” Margosian said. “I share in the optimism expressed here because I work in retail. And retail is doing well.”

Margosian said that Highland Management Associates’ retail portfolio is more than 92% occupied today.

Despite the optimism, panelists did say that Chicago, like all markets across the country, faces economic challenges today.

Rook pointed to spec construction. This has slowed significantly, he said, and most of the projects that his company, ARCO/Murray, is now taking on are build-to-suit developments.

“Last year, I’d say that over 80% of our projects were build-to-suit,” Rook said. “We are seeing some signs that spec development is slowly coming back. I’d say that spec development is at the 1-yard line. It has a way to go before it is back.”

Szarzynski said that despite some promising signs, the world of commercial real estate continues to evolve to new trends, including the persistence of the work-from-home movement, which continues to hit the office sector.

To survive, commercial real estate professionals need to recognize that the market is changing. Those who don’t evolve will struggle to survive.

“I think that 2025 will be another year of change,” she said. “There will be a shifting in all product types. As we look back at 2025, we’ll see that the commercial real estate industry had to continue to adapt with the world and how it is changing.”

Witkowski said that 2024 was definitely a challenging year for commercial real estate professionals. He predicted that 2025 will bring its own challenges, but he also said that he expects an increase in commercial leasing, development and sales this year.

He also agreed that Chicago remains a top city for commercial real estate and business in general, despite what the media often report.

“Chicago has taken a beating lately in the headlines,” Witkowski said. “But I am still bullish on the city. Chicago brings a lot to the table. Great things are happening here. I think that 2025 will be a great year for Chicago.”

Development Market Update: Planning for a busier 2025

Development Market update panelists: Keith Lord, President, The Lord Companies; Benjamin Householder, Shareholder, Greenberg Traurig, LLP; Michael Fassnacht, Chief Growth Officer and President, Chicagoland, CLAYCO; Lori Healey, SVP, Operations & Implementation Lead, Obama Presidential Center; Eric Nordeen, President of the Great Lakes Region, Ryan Companies; Chad Huber, Vice President, W.E. O’Neil Construction; Dan Fogarty, Chief Investment Officer-Principal, Stotan Industrial; and Mike Potter, Executive Vice President, Riverside Investment & Development.

 

Speakers on the Development Market Update panel, moderated by Benjamin Householder, shareholder with Greenberg Traurig LLP, were optimistic, too, about the state of commercial development in the Chicago region. They agreed that development activity should rise this year.

Speaking on this panel were:

• Dan Fogarty, chief investment officer and principal with Stotan Industrial
• Eric Nordeen, president of the Great Lakes Region for Ryan Companies
• Keith Lord, president of the Lord Companies
• Michael Fassnacht, chief growth officer and president for Chicagoland with Clayco
• Lori Healey, senior vice president of operations and implementation lead, Obama Presidential Center
• Mike Potter, executive vice president with Riverside Investments & Development
• Chad Huber, vice president of W.E. O’Neil Construction

This panel began with Healey speaking about why Jackson Park on the South Side of Chicago was the right place for the Obama Presidential Center.

Healey said that the goal is for the presidential center to serve as an anchor on the South Side. Healey also pointed out that the presidential center is a completely not-for-profit development.

“Every dollar has been privately raised,” she said. “We believe that this will be one of the most successful investments in the South Side.”

Fassnacht spoke about construction on the PsiQuantum Campus on the former U.S. Steel site also on Chicago’s South Side. The goal, he said, is to make Chicago a global quantum computing hub while also reinvigorating this slice of the South Side.

This project also shows the strength of Chicago, Fassnacht said.

“Chicago pitched for this project for two years against other major markets, and we won,” he said. “We had cooperation from our government bodies. We brought together our academic talent. We have some of the best academic talent in the country. For 32 years, this site has been vacant. We can turn this around and build an amazing future technology on this site.”

Huber said that it’s true that several development projects were shelved during the last several years. But this is starting to change, he said. Companies are again talking about expanding, and many are eager to open new facilities.

“Five years ago, we had so many planned projects that we were panicking a bit. ‘How could we get all these done?’ Obviously after COVID, things changed. These projects were put on the shelf,” Huber said. “But now we are seeing more clients talking about building again. We have the capacity for this. I say, ‘Bring it on!’”

Potter said that the office market still faces its challenges. And while conversions might help lower the supply of outdated office space, it is not a silver bullet.

As Potter said, converting old office space into other uses, such as multifamily or industrial, can be prohibitively expensive. It’s also important to find the right property to convert. Not all will work, he said.

“After COVID, we realized that there is an oversupply of old office space that could be converted to residential,” Potter said. “Converting these spaces could help us bring more of a 24/7 environment to downtown Chicago. There is inventory available. It’s just a matter of finding the right spaces to convert.”

Lord said that he expects to see an increase in retail development in the Chicago area in 2025. This is partly because of the resiliency that the retail sector has shown in recent years. But it’s also because Chicago is such an attractive market for retailers.

As Lord said, the severe weather that is hitting cities in states such as Florida and California only boosts the attractiveness of Chicago.

“California and Florida are no longer the shining gems they once were,” Lord said. “I think there will be a flight back to retail in Chicago.”

Lord predicted that certain retail segments will remain hot, including grocery-anchored retail, athletic facilities and health-and-wellness retail.

Nordeen pointed to the resurgence of onshoring as a key factor for the industrial sector. Many companies are considering bringing at least a portion of their manufacturing to the United States, Nordeen said. That can only provide yet another boost to local industrial market, he said.

The rise of A.I. will also have a positive impact on this sector, Nordeen said.

“There is a giant demand wave for A.I. and data centers,” he said. “It’s like nothing I’ve ever seen since I’ve been in this business. We don’t historically see real estate sectors have this kind of growth arc. There is a massive opportunity here for data center development.”

Fogarty agreed that the industrial market in Chicago and around the country will remain strong in 2025 and beyond.

“When the pandemic started, it supercharged the industrial business,” Fogarty said. “Thanks to that, the cap rate between Chicago and the smaller Midwest markets evaporated. Today, the industrial vacancy rate in the Chicago area is sub-5%. There are a lot of advantages to being in the industrial market in Chicago.”

Navigating Capital Markets: Financing is back

Navigating Capital Markets panelists: Frank Montalto, Managing Director, Institutional Property Advisors (IPA), Marcus & Millichap; Jerry Lumpkins, SVP, Valley National Bank; Jack Brennan, Managing Principal, Brennan Investment Group; Annamarie Bjorklund, Senior Vice President, Debt & Equity, Northmarq; Chris Ellis, Senior Director, Nuveen Green Capital; Adam Johnson, Executive Vice President, NAI Hiffman; and Roger Daniel, President, Daniel Management Group.

 

The Navigating Capital Markets panel also had a positive message for attendees: Commercial financing is back … if you know where to look for it.

Moderated by Annamarie Bjorklund, senior vice president of debt and equity with Northmarg, this panel featured:

• Jerry Lumpkins, senior vice president of Valley National Bank
• Adam Johnson, executive vice president with NAI Hiffman
• Chris Ellis, senior director with Nuveen Green Capital
• Frank Montalto, managing director with Institutional Property Advisors (IPA)
• Jack Brennan, managing principal of Brennan Investment Group
• Roger Daniel, president of Daniel Management Group

Daniel kicked off the panel by focusing on the rising demand for commercial financing to help fund the development of multifamily projects throughout the Chicago market. As Daniel said, the demand for apartment units is not slowing. And neither is the need for these housing units.

“There is a lack of supply in the Chicago market at the moment,” Daniel said. “Chicago is one of the fastest-growing rental markets in the country. The vacancy rate in local apartment developments is low. Occupancy in the CBD is high. Rents across the market are high. It’s also difficult to purchase a home today. That all leads to strong multifamily demand.”

Lumpkins agreed that the local multifamily market remains strong. He pointed to the suburbs as also showing strength when it comes to this sector.

“The occupancy rate in suburban properties is so high now,” Lumpkins said. “And it just stays there. It’s impressive. That strong occupancy rate is one of the reasons why I sleep so well at night. Properties with vouchers are strong, too. There is a lot of demand for that. It makes sense: You can’t outsource where you live.”

Panelists agreed that demand for financing for industrial projects remains strong, too.

Brennan said that occupancy rates remain high in his industrial portfolio throughout the Chicago market.

“Chicago has seen its share of negative headlines lately,” he said. “But the fundamentals of the industrial market here are strong. The absorption level of the local industrial market ranks in the top three in the country. Our location is excellent. We have strong transportation networks. There are advantages in the Chicago industrial market.”

Of course, not all commercial sectors are performing as well. The office sector continues to struggle, and financing requests in this slice of the industry are down.

Johnson said that Chicago has too many outdated office properties that need to be converted. The supply-and-demand equation in the office sector is out of balance, he said.

“We need the denominator to go down,” Johnson said. “We need to convert more office to residential, industrial or data centers. There is simply too much outdated office product here.”

Ellis, whose company specializes in C-PACE financing, said that the C-PACE program offers an alternative for commercial property owners who want to finance energy efficiency, water conservation and renewable energy projects.

“We can help fill the financing gaps with this program,” Ellis said. “We can come in and help owners pay off their construction loans.”

Ellis said that many property owners still need to learn more about how C-PACE financing works. But once they do, he said, they are eager to embrace it.

“We talk about how important it is to get creative with financing,” Ellis said. “This is an opportunity for that. Banks are more comfortable with C-PACE financing. We don’t accelerate even in the case of default. It’s one of the benefits of going with C-PACE.”

And as far as financing activity in 2025? Montalto predicted that this year will see more closed commercial loans than during the last few slower years.

“I am very excited for 2025,” Montalto said. “We already saw that activity was higher in the fourth quarter of 2024. And so far, this year is starting off well. We have some of the strongest-rooted banking groups in the country in Chicago. We are poised for a stronger year in 2025.”

Regional Economic Development Opportunities: Hope for the future

Regional Economic Development Opportunities panelists: Hannah Loftus, Vice President, Research, World Business Chicago; Chris Brewer, Vice President, AECOM Technical Services, Inc.; Kevin Leighty, Economic Development Director, Village of Oswego; Ronald Lanz, AICP, Business Development Director, Lake County Partners; Alyson Grady, Deputy Director, Office of Regional Economic Development, Illinois Department of Commerce & Economic Opportunity; Heather Ennis, President & CEO, Northwest Indiana Forum; and Kevin Kramer, CEcD, Director of Economic Development, Village of Hoffman Estates.

 

The event’s final panel, Regional Economic Development Opportunities, was all about hope, hope that major development projects will continue to benefit Chicago and its surrounding areas.

This panel, moderated by Christopher Brewer, vice presidents of economics + advisory with AECOM, featured some of the busiest economic development officials in the state:

• Alyson Grady, deputy director of the Office of Regional Economic Development with the Illinois Department of Commerce & Economic Opportunity
• Ronald Lanz, business development director with Lake County Partners
• Heather Ennis, president and chief executive officer of the Northwest Indiana Forum
• Kevin Kramer, director of economic development with the Village of Hoffman Estates
• Kevin Leighty, economic development director of the Village of Oswego
• Hannah Loftus, vice president of research with World Business Chicago

Again, the message here was one of optimism. Panelists agreed that Chicago and its surrounding areas remain a draw for new businesses and development. That’s thanks to its central location in the country, educated workforce, strong educational institutions, impressive transportation infrastructure and ranking as the third-largest city in the United States.

As panelists said, Chicago is a powerhouse, and it’s not surprising that companies want to locate here.

Panelists pointed to projects such as the PsiQuantum Campus and the many data center and life sciences projects scheduled for the Chicago market as proof that this region is a strong one when it comes to new development.