| Just how much good news can an audience of more than 600 stand? A lot, as it turns out, provided by two high-powered panels at Bisnow's Third Annual Chicago Multifamily Summit at the River North Westin yesterday. But the experts also had some caveats that boiled down to "nothing lasts forever, so watch out." |
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| Moderator Joshua Hanna, partner at the real estate group of Kirkland & Ellis, expertly queried the panel on: multifamily fundamentals, which are generally good; demographics, which also favor the market; and the prospect of overbuilding, which might prove to be a headache in a few years. |
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| Joshua also polled the panelists on the critical matter of who they’re supporting in March Madness. On the whole, each panelist is pulling for his alma mater, including one who said the University of Alberta (we'll tell you who that was later). |
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| Curt Bailey (left), president of development specialist Related Midwest, addressed the question of just how high multifamily rents
can go after a couple of very sweet years for landlords. It's a
question near to his heart, since Related Midwest broke ground not long
ago on a 500-unit luxury apartment tower at 500 Lake Shore Dr.
Eventually, Curt said, rising rents will help persuade some tenants to
return to the for-sale housing market, though not over night. That
could create an excess of supply if development continues to be hot in
the meantime. On the other hand, many tenants will still see value in
renting, even if it's more expensive, because of the new mindset about renting over buying. That's especially true in a place like Chicago, where high-achieving professionals, empty-nesters, and retirees want to rent in the city. |
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| Some renters will be stuck with student loans for many years, Jeff Elowe,
president of the Laramar Group, pointed out (during a moment when his
mic apparently gave him a little trouble and he fixed it with a stern
gaze). It’s the stickiest kind of debt, and in the years ahead will be a
factor in keeping people out of the for-sale residential market,
something that isn't widely acknowledged right now. As someone who has
invested over $700M in over 100 assets the course of his career, Jeff
also had a few words about the abundance of cheap capital these days: "Use it wisely, but use as much as you can while it’s so cheap." |
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| Dan McCaffery (right),
chairman of McCaffery Interests, is sanguine about the long-term
prospects for multifamily rental growth, especially in the urban core districts of Chicago, where companies are relocating from the suburbs and bringing higher-paying jobs with them. The suburbs, he said, are going to have a tougher time making further rent rises stick, especially as the reality of $5 per gallon gas makes suburban living more expensive. Dan is currently creating a $4B new urban core in Chicago by redeveloping 589 acres of lakefront property
on the South Side, part of which was once a US Steel facility. He,
incidentally, was also the one who said he'd be cheering for the U of Alberta in the upcoming weeks. After all, they can't lose. (Go Golden Bears! Yes, we had to look that up.) |
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| How valuable is retail space in the same building as a multifamily property? The panel couldn't agree on that question, but Greg Mutz,
chairman of AMLI Residential Partners, expressed an unfavorable view.
At 64 apartment properties totaling about 22,000 units (with 10 of
those properties in Chicago), AMLI's holdings are quite extensive. And
from the sound of it, Greg has had his fill of urban planners,
often besotted with the streetscapes of the livelier cities of Europe,
forcing multifamily developers to include retail that cannot and does
not work at the site. The retailers, he said, might as well bring a bankruptcy lawyer to the lease signing. |
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| Demographics might be on the side of multifamily, noted Jonathan Holtzman, chairman of Village Green Cos, but landlords may end up alienating young adults. It's possible they're no building enough studios to accommodate the way people in their 20s prefer to live–without roommates,
in contrast to the way things were when most of the developers were
that age. (Remember that back then, everyone was listening to Creedance
Clearwater Revival and living in communes.) Jonathan also said that
multifamily owners ignore social media at their peril. It's where a conversation happens about a building, and if the tenants are unhappy, they're going to let the world know about it. Jonathan opened a major redevelopment in downtown Chicago just last week—the 300+ apartment Randolph Tower—and if there’s one demographic he wants to win over, it’s young professionals. |
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| The Multifamily Summit audience took some time to schmooze
in the foyer of the ballroom. There was a lot of food for thought
offered by the panelists, of course, but we think they also really liked
the new lagniappe that Mark Bisnow was giving away. Curious as to what it was? Check back for more coverage tomorrow. |
