Landlord pockets $46 million payout in apartment refinancing
U.S. Economy Strong, Fed Raises Rates
Commercial property values flatten out

The Numbers are in!

Marcus & Millichap 2017 Chicagoland Closings:

332 Transactions Totaling $1.45 Billion

Continue reading “The Numbers Are In Marcus and Millichap 2017 Chicagoland Closings”

 

A combination of job growth, healthy demographics and accelerated household formation creates a rosy outlook for apartment investments in the coming year. For Chicago, location and property type should be taken into consideration. This is according to Marcus & Millichap’s 2018 Multifamily North American Investment Forecast.

As unemployment hovers around 4 percent, companies face significant staffing needs. These tight labor conditions should place additional upward pressure on wages, potentially boosting inflationary pressure in the coming year. For the multifamily sector, this combination of strong employment market, rising wages and elevated confidence levels could unlock accelerated household formation, particularly by young adults.

The housing sector added just 3 percent to the economy last year, about two-thirds of the normal level. The new tax laws should accelerate this trend as they disincentivize new home construction, causing homebuilders to reduce construction and thus shifting a portion of the housing demand from homeownership to rentals.

From a national perspective, rising development costs in the coming year, tighter construction financing and mounting caution levels will curb the pace of new additions from the 380,000 units delivered in 2017 to approximately 335,000 apartments. Although the pace of completions will moderate in 2018, additions will still likely outpace absorption.

Class A vacancy rates advanced across the country to 6.3 percent in 2017 and will continue their climb to the 6.8 percent range over the next year. Vacancy rates for Class B and C assets will rise less significantly in 2018, pushing to 5.0 percent and 4.7 percent, respectively. Average rent growth will taper to 3.1 percent in 2018 as concessions become more prevalent, particularly in Class A properties.

For investors, the looming interest rate escalation could weigh on buyer activity. Cap rates have held relatively stable over the last two years, and the sturdy outlook for apartment fundamentals is unlikely to fundamentally change this year. Investors are broadening their search for investment options with upside potential, opening up their portfolios to include a variety of Class B and/or C assets, outer-ring suburban locations and properties in secondary or tertiary markets.

Across Chicago, robust construction in the core outpaces net absorption and vacancy will edge higher in the city this year as completions reach new highs. More than half of all deliveries will be in the urban core, pushing vacancy up in the Loop and other downtown neighborhoods as supply outstrips demand.

The influx of luxury and high-tier rentals will increase the use of concessions and moderate rent growth as units begin to lease. However, further corporate expansions in the Loop, including Walgreens and Amazon, are luring additional residents downtown, which should minimize any significant uptick in the area’s vacancy. In the suburbs, relatively lower rents will keep vacancy below 5 percent despite a growing construction pipeline. Potential first-time homeowners may continue to rent in the face of rising property and utility taxes, further benefiting apartment demand.

Favorable cap rates spur investor interest in Chicagoland and first-year returns that trend above gateway markets will entice a diverse pool of buyers this year. Institutional investors will propel transactions in the urban core and a jump in completions may provide additional opportunities for top-tier assets. Luxury buyers (between $1 million and $10 million) that have been priced out of downtown may pursue properties along “L” stops and near the northern lakefront where cap rates in the high-5 percent area can be found.

Less risk-averse buyers will chase yields near 9 percent in southern Chicago suburbs. These neighborhoods typically maintain vacancy rates below 4 percent. Metro-wide, demand has pushed valuations beyond the previous cycle’s peak and buyers have begun to show resistance to higher prices. These widening expectations between buyers and sellers may slow deal flow this year. Additional headwinds include concerns about rising taxes due to state and local budget issues, which could prompt some owners to list.

 

Source: RE Journals | Staff Writer | By Matt Baker

Vacancy in Chicago-area retail properties declined for the second straight quarter during the first three months of 2017.

The rate fell to 9.5 percent, down from 10.1 percent in the fourth quarter—but an increase from the year-earlier period’s 8.9 percent.

Vacancy is expected to remain more or less steady in the near term as supply of new space is pinched.

“I don’t see anything on the horizon that’s going to goose the vacancy,” said Kim McGuire, a senior vice president of CBRE, which conducted the survey. Not that much new construction is hitting the market, he said, and what does is significantly pre-leased.

 

Moreover, the unemployment rate fell to a 10-year low of 4.5 percent in March, and consumer confidence rose to its highest level since 2000, spurring demand, CBRE said. Asking rents climbed to $18.65 a square foot from $18.54 in the fourth quarter. Asking rents were $18.75 a year ago.

But any optimism on the retail front is tempered by prospects for a record year of bankruptcies in 2017, as the industry adjusts to more online shopping and fewer visits to the mall. Already this year, bankruptcy filers include the Limited, RadioShack, hhgregg and Gander Mountain. Other retailers, like Sears Holdings and Macy’s, are closing stores by the score.

The picture for retail landlords has improved since the third quarter, when vacancy hit a recent peak of 10.2 percent. A major factor was more than 1.3 million square feet flooding the market after Sports Authority’s liquidation.

Although the biggest first-quarter leases were for a Mariano’s supermarket in Crystal Lake and a Dick’s Sporting Goods store in Gurnee, fitness facilities—whether big (LA Fitness) or small (Orangetheory Fitness)—are the hungriest space eaters, CBRE said.

Another bright sector was “power/community” developments, where first-quarter vacancy was 7.2 percent.

Mellody Farm, a  270,000-square-foot mixed-use development  in Vernon Hills announced this month, is due for completion by the end of next year. Anchors include a Whole Foods Market, Nordstrom Rack and REI.

Also in the category is Kildeer Village Square under development in north suburban Kildeer.

The lowest vacancy was in the city north of the Eisenhower Expressway, at 3 percent, while the west suburbs clocked in at 5.8 percent. Far west suburbs had the highest submarket vacancy (12.9 percent), while neighborhood vacancy overall was 13.5 percent.

“Anything that has ‘far’ in front of it has high vacancy,” said McGuire, a result of overly optimistic developer projections for housing growth. (The far southwest suburbs were an exception, with 5 percent vacancy.)

Although fast-casual restaurants have propelled leasing, the category is not immune to competition. Two pizza chains retrenched: Toppers closed all five Chicago-area locations, and Pie Five shut eight of nine local restaurants.

On the South Side, Binny’s Beverage Depot moved its Hyde Park location to 47th Street in the Kenwood neighborhood, increasing its store size to 11,000 square feet from 3,500.

Coldwell Banker Commercial Services Chicagoland

Coldwell Banker Commercial Services Chicagoland

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Drawing upon Coldwell Banker Commercial’s over 100 years of excellence in commercial real estate, our professionals offer experience, in-depth knowledge and superior customer service. Our dedication to service is exemplified by our client relationship, which includes providing market research, acquisition and disposition services, leasing, asset and property management, investment property, sales and corporate consulting. Committed to client satisfaction, our professionals ensure that all details are planned and managed in a proficient and timely manner.

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By understanding current market conditions and anticipating trends, we successfully achieve your relocation, expansion, consolidation and innovative space requirements. With access to up-to-date technological tools including contact management software, tenant and owner databases, online communication systems and social media, we not only provide you with current information, but can also list and service your property on a worldwide network. We effectively represent your property as an informed professional.

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A full-service commercial organization, our professionals stand ready to help clients discover untapped commercial real estate market opportunities and to deliver a range of services designed to add value to their businesses.

The Coldwell Banker Commercial organization is committed to providing exceptional commercial real estate services across all commercial property types and service lines. We provide guidance in every aspect of the commercial real estate transaction:

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Lombard apartments sell for $86 million

Lombard apartments sell for $86 million

Lombard apartments sell for $86 million

A venture backed by a big Texas investment fund paid $86 million for a Lombard apartment complex, the second-biggest deal in what could be a record year for apartment sales in suburban Chicago.

The venture between Dallas-based Crow Holdings and Marquette Cos. of Naperville acquired City View at the Highlands, a 403-unit property just west of the Yorktown Center mall, from Sentinel Real Estate, according to DuPage County property records.

City View is a fixer-upper, or a “value-add” investment, in industry parlance. The two firms aim to boost their returns by renovating the property, overhauling its fitness center and clubhouse and rehabbing its apartments, said Marquette President Darren Sloniger.

“We felt there was enough meat on the bone” to get the returns they’re seeking, he said.

County records show that Crow, which manages investments for the family of legendary developer Trammell Crow, invested in City View through a $1.85 billion fund it raised last year. Sentinel, which paid $78.6 million for the property in 2006, sold it to the Crow-Marquette venture in August for $86.2 million, or $214,000 a unit, according to county records.

That’s makes it the second-biggest suburban apartment deal so far this year, after Connor Group’s $105 million acquisition of Stonebridge of Arlington Heights in February, according to a report from Appraisal Research Counselors, a Chicago-based consulting firm.

With so many investors scooping up suburban apartments, 2016 is on track to be the strongest year for suburban multifamily sales ever, topping the $1.2 billion record set in 2007, according to Appraisal Research. Suburban occupancies are high, rents keep rising and development is rising but not enough to create a glut.

The suburban market has “been very stable,” Sloniger said. “Anytime we hit any kind of softness, we’re always able to pull out if it in 60 days or so.”

Developed in 2003, City View was 96.5 percent occupied at the end of the second quarter, according to the Appraisal Research report. Rents at the property at 2720 S. Highland Ave. range from $1,180 a month for a one-bedroom unit to $2,295 for a three-bedroom.

Marquette’s other local properties include Catalyst, a 223-unit apartment building it developed in the West Loop, a 278-unit tower in the South Loop that it’s in the process of selling and an apartment project in the works in west suburban Lisle.

Source:  Crain’s Chicago Business October 4th, 2016 Abby Gullun

biggest suburban chicago apartment deal in 18 months
biggest suburban chicago apartment deal in 18 months
Stonebridge of Arlington Heights is a 586-unit apartment complex.

Biggest Suburban Chicago Apartment Deal in 18 months
An Ohio landlord on the hunt for apartments here has pulled off the biggest multifamily acquisition in the Chicago suburbs since September 2014.

Ventures led by Connor Group, based outside Dayton, paid $105 million, or about $179,000 a unit, last month for Stonebridge of Arlington Heights, a 586-unit complex in northwest suburban Arlington Heights, according to a deed filed with Cook County. It is the third acquisition in 18 months in the Chicago suburbs for Connor, which owns 14,000 apartments in the eastern half of the country.

Connor is expanding its presence in a strong suburban apartment market that shows few signs of weakening in 2016 amid steady job growth and a continued preference for renting over owning among many suburbanites. The median net suburban rent rose nearly 4 percent last year, with similar increased expected in 2016, according to Chicago-based consulting firm Appraisal Research Counselors.

Rents have been rising since 2009, about when Connor started shopping for apartments here. The firm made its first acquisition in September 2014, when it paid $61.8 million for Glenmuir, a 321-unit property in Naperville. About a year later, it completed its second deal, paying $62.1 million for Alara at Summerfield, a 368-unit complex in Aurora now called Aurora at Summerfield.

Chicago is “a big market, there are a lot of renters by choice and the submarkets we’re in are highly desirable,” said Connor Partner Pat Rini.

Connor acquired Stonebridge from its longtime owner, a venture led by local investor Maria Magnus, who did not return calls. Connor financed the acquisition with a $78.7 million loan from Freddie Mac, count records show.

The Stonebridge deal is the biggest sale of a suburban Chicago apartment complex since September 2014, when Woodland Creek, a 640-unit property in Wheeling, sold for $118.5 million.

Rini said a confidentiality agreement prevented him from discussing the transaction but not the Chicago apartment market or Connor’s plans for the Arlington Heights property.

Stonebridge, at 600 W. Rand Road, is a so-called value-add acquisition for Connor, which plans to spend $6 million on a major interior and exterior renovation, Rini said. The firm is revamping the apartments with new countertops, appliances, flooring and other improvements, he said. The project will allow Connor to charge higher rents and ultimately boost the value of the property.

Built in 1975 and last renovated in 2011, Stonebridge is considered a Class C property, with rents ranging from $1,250 a month for a one-bedroom apartment to $1,480 for a two-bedroom, according to an Appraisal Research report. Rents have held roughly steady over the past year or so, at $1.34 per square foot, the report says.

Connor is being patient in its search for apartments here, but it ultimately could end up with another half-dozen properties here, possibly even some downtown, Rini said. To achieve scale, the firm aims to own six to 10 properties in each of its markets, enough to cover the cost of a local office and other operations.

“We’ll get there,” he said. “I don’t know if it will be sooner or later, but we’ll figure it out.”

Source: Chicago Real Estate Daily, Alby Gallun April 6, 2016