2016 in Review:
While 2016 saw a relatively stagnant housing market, there are a few real estate trends that dominated last year:
Hospitality Property Increases
Hotels have a long history of galvanizing change in neighborhoods and a boom in 2016’s hotel real estate market should make for the interesting evolution of the greater Chicagoland area. Increased tourism and large conventions are responsible for the surge in the hospitality real estate, with the two most popular areas being near O’Hare and McCormick Place. The hospitality industry also continued to spill into the South Loop, which could lead to a significant surge of new hotels and in turn, new hip retail downtown.
Retail Leasing in Outlying Neighborhoods
The demand for downtown luxury condos has been high for millennials, and it creeped into West Town and Logan Square over the course of 2016. Older, affluent millenials and those in their late thirties, however, have been gravitating to outlying neighborhoods, specifically on the north side (Roger’s Park, Uptown, Edgewater), and this has driven up retail leasing in these pockets markedly. The South and Southwest neighborhoods and surrounding suburbs also saw the same uptick in retail properties, and retail landlords have gained greater equity in their properties as rent demand has grown but interest rates have remained low.
Industrial Sector Booms
The industrial sector was arguable Chicago’s most thriving real estate market in 2016 with vacancy rates at a ten-year low (and still declining). Chicago’s location and overall infrastructure has made it a popular market for both foreign and domestic business and the need for distribution centers for e-commerce helped Chicago solidify its position as an industrial hub in 2016.
While the Chicago housing market may not turn around rapidly or entirely, there are still a few real estate trends to be on the lookout for in 2017:
Minimal Property Value Increase
A generally sluggish local economy in 2016 and so far in 2017 will almost certainly contribute to minimal increases in property value city-wide. Chicago is likely to see a mere 2% (or less) increase in home prices overall, which is below the national average of 3.9%; in short, this leaves Chicago’s market behind those in Denver, Seattle, etc. Within two years, prices should start to climb a bit more significantly and steadily, but for 2017, many homeowners will hold out to sell until the market turns.
Northside and Loop Stability
Taking the above into consideration, some of Chicago’s characteristically hotter neighborhoods are still seeing market price increases. Home prices in Logan Square, for example, have climbed astoundingly since 2016 and are now up 3% from their former highest peak in 2006. The same goes for Lincoln Square, North Center, Avondale, and Lakeview, which all seem to be in the “slow and steady win the race” camp in terms of yearly increase in property value. Moreover, the West Loop and Fulton Market will continue to boom in 2017.
Commercial Real Estate Booms
As in 2016, the industrial market will continue to thrive, but 2017 will also see a boom in commercial office buildings, mostly downtown. Vacancy rates for office properties are at an all-time low of 3.5% and demand for high-end workspace that is close to commerce and transport will not slow anytime soon.