Commercial investments are increasing over the past six months in Chicago and other areas of northern Illinois and that's a good thing for suburbia, according to several recent reports. From multifamily housing to shopping malls, investors in Illinois and other states are buying and leasing commercial properties at a faster clip than just one year ago.
Healthier National Economy Makes for Better Commercial Activity
Property.com and other real estate professionals credit the favorable national economy for the rise of commercial investments in the region. As more and more people are feeling better about spending and buying homes there, the boost in commercial activity is a natural next step. Property owners are setting more realistic selling prices than in the recent past, making it more attractive for commercial investors.
Multifamily housing leads the way in this economic recovery, getting the most attention from investors and the most dollars as well. It's simple supply and demand. Vacancies are lower than previously experienced, more people are wanting to rent, and monthly rents are increasing. Plus, interest rates on loans are relatively low. Collectively, landlords are seeing excellent return on their commercial investments not only from monthly rental rates but on property value as well.
Florida Firm Contracts to Buy Shopping Mall
Another type of hot property for commercial investments in the Chicago area is retail. One recent example comes from an out-of-state investor. Palm Beach, Fla.-based real estate firm Sterling Organization LLC is in contract negotiations right now to buy one of the oldest malls in the Chicago region – Golf Mill Shopping Center in the city of Niles.
Developed in the 1950s during the post-World War II Baby Boom era, Golf Mill has been struggling compared to other retail centers in the area that made consistent improvements over the years to keep up with national trends. A Bloomberg report points out the mall lost money three years in a row through 2012 even though it had an occupancy rate in the mid 90% range.
Sterling will likely need to make upgrades to the nearly 220,000 square feet of interior space that sits on 66 acres to turn it into a money maker. The mall is anchored by Sears, J.C. Penney and Target, and also includes an AMC theater, Kohl's and a Dress for Less. So there is a strong presence in the middle-class neighborhood where the mall is located. But other uses may be considered, including building apartment homes to make Golf Miles more of a destination and differentiating it from its many nearby competitors.
The potential new owner will have to act quickly though. A number of leases for tenants will either roll over or end in 2015, and a $48 million loan on the property that matures in 2016 will need to be paid off or refinanced. This is not the investment firm's first commercial property in Illinois as it owns two other shopping centers in the Chicago area.
Warehouse Space Needed
While there is confidence among commercial investors in the bricks-and-mortar retail market, there is also a rise in online retailers. Of course this poses serious competition to retail locations, but on the flip side of the coin is that these Internet companies need some place to store their goods. That's why northern Illinois is also seeing a surge in demand for warehouse space – yet another strong point for commercial investments in this market.
Online retailers look for industrial warehouse space near major urban areas, including Chicago. That makes this segment of the commercial real estate market one of the strongest and top-performing spaces this year, a RE/MAX report states.
Commercial Activity on the Rise in Ottawa, IL
A real estate broker in Ottawa in northern Illinois noted in a press release the increased level of commercial activity in that market is expected to continue through 2014. The broker is seeing commercial activity at a pace that hasn't been seen since the “really good years of 2006 and 2007.”
No longer are commercial properties on the market for a year or more, instead being snapped up at increased pace.
There is also a new comprehensive land plan for downtown Ottawa that is creating some excitement for its commercial investment potential.
Additionally there have been major land sales that would suit commercial spaces to be built.
Iconic Brands Leaving Suburbs for Big City Life
This increased activity in the suburban areas of Chicago comes at a good time because the region has lost a number of big-brand companies. As Crain's Chicago Business magazine reported, major employers such as Motorola Mobility, Hillshire Brands Co., formerly Sara Lee Corp., and United Continental Holdings Inc. have all left the suburbs and moved to central Chicago. Additionally, AT&T Inc. has transferred hundreds of jobs from the suburbs to the central city area, Crain's said.
And now, Walgreen’s is looking into the possibility of moving its headquarters from Deerfield, IL, to the Old Main Post Office in downtown Chicago. The company moved to Deerfield, IL, in 1975 and employs some 3,500 people. Who knows whether that workforce would be willing to travel to Chicago every day.
If you are looking to relocate or invest, it appears to be a good time for commercial investments in northern Illinois. Take a look at commercial properties for sale or lease at: http://www.property.com.
How to Get Started in Commercial Investments
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