Chicago Seizes DNC Spotlight To Recast Its Image. Will It Move Investors?

As Chicago hurtles toward its date with the Democratic National Convention in mid-August, commercial real estate hopes the spotlight moment will begin shifting a negative narrative that has been blamed for keeping investment dollars away for years. 

Much of the bad press surrounding Chicago focuses on an influx of immigrants into the city and perceived issues of crime. Surveys in both 2022 and  2023 document that the CRE community believes perceptions of the city being unsafe and poorly managed have impacted investment flows. Over the past several years, a handful of major corporations, including Boeing, Caterpillar and Citadel moved their HQs out of the city, voting with their feet on the city's future.

But despite some built-in disadvantages that won't be solved by the event — namely perceptions of high taxes and leadership that is unfriendly to business — industry players said the four-day political carnival kicking off Aug. 19 could mark part of the start of an image makeover.

The DNC is a great opportunity to showcase the richness of Chicago and the vibrancy of its 77 neighborhoods, said Michael Fassnacht, Clayco’s chief growth officer and president of the Chicagoland region. 

Telling a compelling narrative on both an emotional and rational level is important because both factors are key in decision-makers' investment choices, said Fassnacht, who served as president and CEO of public‑private economic development agency World Business Chicago until February. 

“Perception matters,” he said. “While we all believe that business leaders always make fully rational, analytical decisions, we all know there's always an emotional component to every business decision. So I think we have to do both.”

Chicago saw a 44% drop in investment flow in 2023, according to MSCI data. Yet, in a year in which all 25 major markets monitored by MSCI got flattened by double-digit transaction declines, it ranked fourth-best among large cities, led by strong interest in its industrial and multifamily sectors. The city ranked seventh for investment flow in 2021 and 2022.

In the weeks leading up to the big event, whether by happenstance or design, the city is starting to see some major CRE announcements, with developers proposing and securing financing for major projects.

Owners of the United Center, where the DNC will kick off, announced a massive entertainment complex Tuesday that would replace the parking lots and area around the arena with a $7B mixed-use district funded entirely with private money. Earlier this month, Bally’s Corp. secured $940M in financing for its sizable casino and hotel complex along the Chicago River. 

Meanwhile, Chicago’s industrial market is revving back to life, with construction ongoing for 43 buildings at the end of June, the first increase to the construction pipeline since the second quarter of 2023, according to a Q2 2024 Colliers’ industrial report.

The city’s multifamily market is performing well, too. Yardi Matrix projects Chicago landlords will see 2.2% rent growth this year, according to its summer 2024 multifamily outlook. That's well above several other once-hot metros across the country that are projected for declines, like Austin's anticipated 4.1% fall and Atlanta's 2.2% dip.

To make a comprehensive pitch for additional investment at the DNC, city leaders need to couple a data-driven investment case for Chicago and its future and tout other perks like insulation from climate change and a robust pipeline of college-educated top talent, Fassnacht said.

Fassnacht said positive momentum would show up in three key economic drivers: additional capital investment, companies expanding footprints or relocating to the city, and more tourists and talent coming to the city. 

But the city is hosting the DNC at a time when political tensions are extremely high. Within the past two weeks, former president and Republican presidential nominee Donald Trump survived an assassination attempt and President Joe Biden dropped out of the race for the country’s top office. 

Governmental leaders like Gov. JB Pritzker and Mayor Brandon Johnson have expressed confidence that comprehensive safety protocols are in place to ensure a smooth event. The Secret Service released plans Thursday for restricted pedestrian and vehicle areas around the United Center and McCormick Place.

“Let me state this unequivocally. Chicago is ready,” Johnson said, according to Block Club Chicago. 

Yet one good moment is unlikely to completely shake the city's tough-to-do-business narrative. Several CRE executives said there is a cap to how much a quick-hit image boost can accomplish without more substantial policy changes. 

The city’s CRE players frequently express displeasure with the Cook County tax system — commercial properties pay taxes at more than 2.5 times the rate of residential properties for the same value property, according to a report from Altus Group.

Johnson also sparred with CRE heavyweights earlier this year when he put a measure that would have significantly increased the transfer tax on commercial properties to a citywide vote in March. That referendum failed by a sizable margin.

Brian Goldberg, CEO of LG Group, said that lack of predictability can kill deals.

“If there's fear and uncertainty in a certain market, like Chicago, meaning I'm uncertain where the taxes are going to be [or] I don't know if I can generate value, that's enough for them to say we're not doing investments in Chicago,” Goldberg said at Bisnow’s Construction and Development event Thursday. 

The DNC is an important moment in the sun for Chicago to change its global perception with investors. But it isn’t the end of efforts to retell the story, Fassnacht said.

“Every day is a piece of the puzzle,” he said. “This is a bigger piece of the puzzle, but it's not the whole puzzle.”