RCA in the commercial property press:

Recession hits harder in Chicago

RE Journals reports: The recession appears to be over, but the Midwest, and Illinois in particular, may have more of a difficult time recovering, according to a Federal Reserve Bank economist at Corenet's 2010 Economic Forecast.

Chicago was a hotbed of activity throughout the 1990s and early 2000s, but employment numbers in Chicago have remained stagnant since the 2000-2001 recession.

With its recent string of disappointments--losing the Olympics, the Spire development, and yes...Oprah deciding to leave town--Rick Mattoon, senior economist & economic advisor, Federal Reserve Bank of Chicago, posed the question: "has Chicago lost its mojo?"

"Employment in Illinois is at the same level as 1997," Mattoon noted. "Illinois has added jobs at 40 percent of the national average. It has even underperformed the rest of the Midwest. Has Chicago lost some of its dynamism?"

The unemployment rate in Chicago shot up 4.1 percent in the past year. While job losses in the U.S. seem to be slowing down, Mattoon said that Chicago will still go through more pain in 2010 as job losses will continue throughout the year.

This will not bode well for area commercial real estate, where high vacancy rates are already a concern. The industry has seen a dramatic slowdown in activity, with $489 billion of commercial real estate transactions in 2007 compared to $42 billion in 2009, according to Real Capital Analytics.

While many of these numbers leave little to be positive about in the short-term, Mattoon did stress that as all economic downturns in the past, this too is a cycle that will pass.
"Even a modest gain in pricing will bring the market back," he said. "There still is value in these properties."

However, he did say that buyers in commercial real estate should have a long-term vision.

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Posted by: Nina Turner

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