As seen in Real Estate BISNOW
DuPage County, with its entrepreneurial bend, good government, and strong workforce (throw in a lion heart and you have CRE love potion), is in a position to benefit from further recovery. More than 275 heard that from panelists at our first-ever State of the West Suburbs yesterday at the Westin Lombard Yorktown Center.
The west suburban office market has had a tough time during the recession and its creaky aftermath. But the panel was optimistic, to a degree, that it would recover more so than the rest of metro Chicago. But no one was optimistic enough to predict spec office space development anytime soon—“not in five years,” said one panelist. (The odds are better that Scott Hamilton will win a gold medal in these games.)
Expert moderation was provided by Alter Group EVP Richard Gatto, who posed a number of intriguing questions: Are the western suburbs good at incentivizing business? What’s the outlook for the office market for the rest of 2012 and into ’13? Can the ‘burbs compete with the city?
Choose DuPage prez Greg Bedalov stresses that his organization, which focuses on economic development, isn’t part of the county government, but is private. The county has the lowest unemployment in the Chicago area and is well-positioned to take advantage of any further economic recovery because of its business-friendly attitude. Now is the time for more aggressive outreach about the benefits of locating in the county, he said, and more coordinated efforts to spur economic development there. “It isn’t a zero-sum game,” he said. “It doesn’t benefit anyone when Town A simply encourages businesses to relocate from Town B, five miles away.” (Plus it's awkward then when Town A sees that business at the supermarket and has to make small talk.)
JLL VP Bruce Renwick says DuPage County has a proven history of being pro-business and pro-growth through relatively low taxes, effective management of public resources, and sensible regulation. He expects that positive environment to continue, along with its diverse labor force and high quality of life. ”It’s no wonder our fiscal condition right now is superior to most counties in Illinois, despite macroeconomic headwinds,” he notes.
NAI Hiffman CEO David Petersen predicts the health of the west suburban markets is going to improve, but it’s going to take some time to get there. Leasing is trending the right way and vacancies are dropping, but the markets need to get through the noise of the upcoming election and work through some credit issues—like everywhere else. It’s not enough any more to focus on the East-West Corridor, even if that’s your specialty, David adds. What’s going on in DC, Beijing, and Europe is going to affect the businesses who lease from local property owners, meaning that those owners need topay attention to the wider world.
Hamilton Partners partner David Andrews points out that for all the perceived “coolness” of a downtown address, plenty of companies—and workers—want to be in the suburbs, for the same reasons they always have: They’re desirable places to live and raise families. (Who wouldn't want a quaint office with a white picket fence in a community where you can go borrow some WiFi from your neighbor.) Loweroffice rents doesn’t hurt either. David also commented on the changing workplace and how it’s going to affect some suburban properties. As workplaces become more dense, the demand for parking will rise and not all properties will be able to keep up, because enlarging parking garages is neither easy nor cheap.
CBRE EVP Dave Justh said that in good or bad economies, tenantsseek out Class-A offices in the western suburbs. In good times, for the amenities. In bad times, for the bargains. In any case, employers will continue to come to DuPage County because they know it has a stable workforce and a prudent government. Like the rest of the panel, Dave doesn’t anticipate any spec officedevelopment in the market any time soon, but he does foresee the possibility of new owner-occupied properties, especially single-story properties now that the cost of land is down.
In attendance was Baytree National Bank SVP-mortgage lending Cissy Larkin, who tells lending has picked up for CRE. Hers is a community bank, part of an industry which she says has been filling an essential role in keeping the CRE industry going in recent years. She's with Baytree EVP Garrick Nielsen and Meridian Design Build VP Joe Grimes.
After the panel, we had a chat with EnTrust Healthcare Properties managing principal Ray Braun, right, with Alter Group director of programs Renata Pasmanik, McShane Development VP Daniel Fogarty, and NAI Hiffman managing director Robert Assoian. EnTrust is the recently established division of our wonderful sponsor Alter Group affiliate EnTrust Realty Advisors, whose sole purpose is to acquire and manage MOB and other healthcare assets.