Building on the positive momentum of 2014, which saw a strengthening for-sale market with Chicago-area home prices up and on par with 2003 numbers, as well as continued demand for new rental options, with Class A downtown apartments averaging 93.8 percent occupancy, Chicago-area real estate experts are looking ahead to 2015 with optimism. Here are the top trends they anticipate shaping the 2015 real estate landscape:
1. Condos Make a Comeback: As buyer confidence grows and lending restrictions decrease, condominium sales – and pricing – will see an uptick in 2015. “There’s strong demand, but new construction has been nearly non-existent since the downturn, and condo inventory is at its lowest level since tracking began in 1997,” said David Wolf, president of Related Realty. “That spells opportunity for developers, and we’re starting to see new projects announced.”
While Related Realty was recently engaged to oversee the sales and marketing for 100 West Huron, a new 28-unit luxury condominium building set to deliver in 2016, Wolf noted Chicago is still two to three years out from any large-scale new-construction projects being delivered. One of the city’s most robust offerings of new-condo inventory in 2015 will continue to be South Loop Luxury by Related, a collection of 500 condos across three towers next to Chicago’s famed Museum Campus. Related Midwest, the developer that reimagined the previously stalled development in 2013, sold 400 units in just over 18 months and Wolf expects the remaining 100 residences to move quickly next year given the neighborhood’s popularity with the proposed DePaul arena and recently announced Lucas Museum.
In the suburbs, developers such as Foxford Communities anticipate similar demand for new-construction units in 2015 given low inventory. Foxford sold more than half of its 72 units at Medinah on the Lake, a luxury condo conversion in Bloomingdale, Ill., in just six months following its 2014 opening, and expects swift sales in 2015 at its newest condominium community, Clocktower Pointe in Countryside, Ill.
2. More Pow, Less Wow: Customization will continue to be key. According to Brian Brunhofer, president of Meritus Homes, while new-home buyers aren’t hesitating to spend money on special touches, the trend is to splurge on high-impact, functional features rather than flashy aesthetic finishes. “Buyers can add virtually anything to our semi-custom home designs, but they also haven’t forgotten about the economic downturn, so they’re definitely discerning in their choices,” he said. “We are seeing a lot more long-term convenience enhancements, like tricked-out mudrooms and home automation systems.”
Fred Wilson, co-principal of architecture and interior design firm Morgante Wilson Architects, concurs. “Most of our clients aren’t first-time homeowners. They already know what areas need the most attention and investment,” said Wilson. “Right now, one top request is a ‘super pantry’ – a state-of-the art workroom adjacent to the kitchen, complete with appliances, counter space and storage that is intended to minimize clutter, mess and congestion in the kitchen,” he said. “It’s a very high-end feature with a huge impact on the running of the household. When something so practical can look fantastic, it’s all the better.”
Jerry S. James, principal of Edward R. James Companies, sees a large group of boomers looking to simplify, while still wanting the level of luxury to which they’ve grown accustomed. “It’s about quality over quantity for these buyers,” said James. “They are seeking designs that are both elegant and appropriate to their lifestyle. First-floor master bedrooms are in, while fourth and fifth bedrooms, formal living rooms, and large yards are out. But smaller does not mean less luxurious. In fact, buyers are willing to spend as much or more on a per-square-foot basis than the dollar-per-foot value of the home they are coming from. Elements that personalize their home, including countertops, bathroom tiling, kitchen appliances, custom cabinetry and millwork – these are all still very important.”
3. Millennial Mania: With millennials projected to make up a third of the country’s adult population by 2020, it’s no surprise they’ve captured the attention of residential developers. Yet Gen Y has held off on buying their first home; in fact, the homeownership rate for the 35-and-under cohort dropped to 35.9 percent in the second quarter of 2014, its lowest level in two decades, and held steady at 36 percent in the third quarter, suggesting this group will drive demand for rental units in 2015 even as new supply comes online.
“In downtown Chicago, the number of rental units absorbed in the first three quarters of 2014 was more than 50 percent higher than the total for all of 2013, indicating new units in the pipeline will be easily absorbed,” said Steve Fifield, president and founder of Fifield Companies, which is developing several rental properties in the Chicago area, including Avant River North, which will break ground in first quarter 2015. “Part of this increasing absorption is due to the changing pool of renters. In our developments, the median age of renters has increased from 26 to 32 years old because millennials are choosing to age in place as they postpone major milestones like marriage and homeownership.”
Tangible factors like slow job growth and student debt will continue to keep many millennials in apartments in 2015, according to David Schwartz, co-founder and CEO of Waterton Associates, whose portfolio comprises approximately 20,000 rental units across the U.S. “In many parts of the country, the cost of renting vs. owning is even, but most millennials would rather spend their money on travel or entertainment than saving up for a down payment. Plus, the vast majority of millennials certainly don’t want to be saddled with home maintenance at this stage of their lives. Not until millennials start having families and their student loans are paid down will this group more seriously entertain buying.”
Other millennials will continue to rent as much by choice as by necessity due in part to the resort-style amenities that are almost standard in the industry, noted David Strosberg, president and managing principal of Morningside Group, whose current projects include a variety of unique amenities, such as a golf simulator, bocce ball courts, Pilates studio and a car wash. “Millennials want and expect more from a rental than what their parents had. It’s not enough to have a pool – it needs to be a pool on par with a Vegas casino,” said Strosberg. “So it’s no wonder that after growing accustomed to all the bells and whistles the newest apartment communities offer, many would-be homebuyers are in no hurry to leave.”
4. The Grandkid Revolution: Baby boomers are another large demographic that will be a prime focus for builders and developers in 2015. But unlike millennials, this group isn’t just looking for themselves – they also have grandchildren in mind.
At 500 Lake Shore Drive, Related Midwest’s luxury rental tower in Chicago’s Streeterville neighborhood, many social boomers appreciate the building’s five-star amenities such as a screening room, outdoor pool and multiple lounge areas. When grandchildren travel downtown to visit residents at 500 Lake Shore Drive, being steps away from Navy Pier, Lake Michigan and other great cultural attractions can make the visit feel more like a vacation for everyone.
With more free time, many empty-nesters are focused on spending it with friends and grandchildren, so finding a place from which they can easily come and go without worrying about maintenance is a big factor, in addition to location. “As folks get older, remaining connected to their families – especially their grandchildren – and staying busy are motivators, and communities and locations that support these desires have done very well for us,” said James of Edward R. James Companies (ERJ). He noted Westgate at The Glen, ERJ’s 171-unit maintenance-free community being developed in Glenview, Ill., is near the Kohl Children’s Museum, a 10-screen movie theater and a number of parks, while Brighton Mews in downtown Park Ridge, Ill., is within walking distance to the suburb’s core retail district, the historic Pickwick Theatre and the esteemed Park Ridge Public Library.
5. Get on Board with TODs: While millennials and boomers are at very different stages of life, these two groups are finding common ground when it comes to the benefits of transit-oriented developments (TODs). “Millennials love the urban feel of living near shopping, dining and transportation, and boomers value those same lifestyle benefits, as well as the fact that a TOD might allow them to live independently longer if they lose their ability to drive,” said Strosberg of Morningside Group, which is developing Wheaton 121, an apartment community just two blocks from the Metra in suburban Wheaton, Ill.
Based on the fast pace of sales at Lexington Station, its community of 31 rowhomes within walking distance of the Morton Grove, Ill., Metra station, Lexington Homes sees no slowdown for TODs in 2015. It took less than 10 months for the builder to sell all but four rowhomes at the community, and Lexington expects similar results for its new Lexington Oaks townhome community in Palatine, Ill., which is within walking distance to retail, restaurants and the Metra station. “We started our first TOD about 15 years ago, and ever since we’ve always tried to have at least one community near mass transit, as we know how important it is to Chicago-area buyers,” said Jeff Benach, co-principal of Lexington Homes.
REVA Development Partners is also bullish on TODs, with plans to deliver two transit-oriented rental communities in 2015: Northgate Crossing in north suburban Wheeling, Ill., and The Residences of Orland Park Crossing in south suburban Orland Park, Ill. Both communities will offer a walkable location and proximity to Metra train service.
6. The Office Within: As more people telecommute from home, office space will be a must-have for renters and buyers. In fact, according to a recent John Burns Consulting survey, an office is one of the top three necessary home spaces for buyers in 2015. “Technology is pushing both adults and kids back into their homes,” noted Wilson of Morgante Wilson. “People no longer have to go into the office or library – they can stay connected from home. And even though mobile technology allows us to work from any room, people still want designated home office areas, as well as nooks and workstations with built-in storage.”
Benach of Lexington Homes agrees. “One way we’ve addressed the growing home office priority for our buyers is creating the option for a built-in desk or office niche on the second-floor landings of select townhomes at Lexington Hills and Lexington Oaks in Palatine, Ill.,” he said. “Almost 100 percent of buyers of those plans choose a home office option.”
And at 73 East Lake, a luxury rental tower in downtown Chicago, developer M&R Development and manager RMK Management Corp. included two separate computer areas: a cyber lounge with an open, social atmosphere, and a business center with reservable conference space, designed for more serious business needs. “Our residents use technology every day, in all aspects of their lives, so we’ll continue to look at new ways to address those different needs through our amenity spaces,” said Anthony Rossi Sr., president of RMK Management Corp. and M&R Development.
7. Buying (and Selling) Outside the Box: The coming year also will see more luxury real estate bought and sold in non-traditional ways, such as the auction market. “In the past, many people viewed auctions as a last attempt to sell a home. But sellers of luxury homes have really come to embrace the auction process as it’s very efficient, gives them a definitive sale date and lets them plan for the disposition of their property accordingly,” said Diana Peterson, president of AuctionWorks. “In fact, with a robust marketing campaign, an auction can create a surge of excitement and anticipation – much more than a traditional real estate listing – which is exactly what high-end listings deserve.
“Plus, not only do sellers not have to worry about their home languishing on the market, but an auction can often result in a higher selling price for a property,” added Peterson. In 2014, AuctionWorks successfully auctioned a five-bedroom home in Chicago’s popular Lincoln Park neighborhood for $1.45 million – $100,000 more than the unpublished reserve price due to a pre-auction bidding war.
Upper-bracket buyers are also warming to REO luxury properties, and not just as investments. “With the for-sale market picking back up, banks and other groups that bought up high-end properties during the downturn see 2015 as a great time to bring them to market,” said Steven Maher, managing broker for Kinzie Real Estate Group. “And many of these are truly spectacular properties, which helps buyers look past the stigma sometimes associated with REO properties and realize the transaction is just like a traditional purchase. They’re simply buying from a bank rather than an individual or developer.”
Maher noted a bank-owned 1930s David Adler-designed mansion on Chicago’s North Shore that Kinzie recently sold in just over a month for 5 percent more than its asking price, as well as a 9,500-square-foot REO home in Lincoln Park that sold in less than six days, with multiple offers.
8. The Art of Making an Entrance: As more urban mixed-use buildings open their doors, developers will put a greater emphasis than ever on common areas with an artistic flair, conveying a property’s character through commissioned artwork, architectural fixtures and curated furnishings.
Several new buildings already exhibited this trend in 2014, including OneEleven, where Related Midwest chose a one-of-a-kind video installation by international artist Diana Thater as the lobby’s focal point, pairing it with unique pieces hand-selected by interior designer Kara Mann to reflect the building’s luxurious lifestyle and urban edge. M&R Development and RMK Management Corp. also used video to make an impact in the lobby at 73 East Lake, where one wall features more than a dozen artfully arranged video monitors of various shapes and sizes showcasing a four-minute video loop of iconic Chicago images.
Looking ahead, Fifield Cos. partnered with Morgante Wilson Architects for the interior design of E2, a new rental tower delivering in spring 2015 in Evanston, Ill. E2’s lobby captures the flavor of downtown Evanston and includes sculptural light fixtures that are as much art as they are lighting. “Lobbies of premier apartment buildings serve not just as a beautiful entrance, but a place to relax and even do business,” said Randy Fifield, vice chair and principal of Fifield Cos., which in the past has commissioned artwork and even used an on-loan gallery of authentic Salvador Dali prints to set apart the common areas of its luxury rentals. “It’s imperative that we set the right tone for our buildings, and art is a great way for us to introduce residents and guests to a building’s personality.”
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Editor’s Note:
For interviews, additional photos or more information, please contact Kim Manning at kmanning@taylorjohnson.com or 312-267-4527.