'Heads Are Going To Be On A Swivel': The 7 Biggest Stories Chicago CRE Is Tracking This Year

If the goal for 2024 was for CRE players to survive till 2025, the new year might provide an opportunity for Chicago’s embattled sector to thrive. 

From megadevelopments to downtown revitalization, seven Chicago CRE stakeholders told Bisnow big news could break quickly in the Windy City in the year to come. 

“Our heads are going to be on a swivel in 2025,” Maverick Hotels and Restaurants CEO Robert Habeeb said of the next 12 months, which insiders predicted could bring resolution to dormant projects, reverse the fortune of the city’s troubled downtown and place Chicago front and center for investors.

Here are seven stories to keep an eye on in Chicago this year:

Moves On Megaprojects

While the Illinois Quantum and Microelectronics Park is seeing progress in its development, other megaprojects around the city, like The 78, the Bronzeville Lakefront and Lincoln Yards, are fairly quiet. 

The 78 lost its $285M anchor tenant in October, the Bronzeville Lakefront site has been a rumored potential destination for the Chicago Bears, and Bank OZK, which backed a portion of Lincoln Yards, took a write-down on its $128M loan for the project in October. 

Movement on any one of the developments would be a “game-changer,” Habeeb said.  

“All the deals that we're talking about are still in the speculative stage, if you will,” Habeeb said. “People seem to be waffling on how fiercely they're going to go after developing them. Just to see somebody that says that they're going to aggressively pursue those developments would be a shot in the arm.”

Stadium Spending

The Chicago Bears and White Sox made headlines last year when they released renderings of new stadiums on the sites of Soldier Field and The 78, respectively.

But owners of both teams have asked for public money to help finance the stadiums, a request that Gov. J.B. Pritzker has repeatedly said is a nonstarter for the state.

Chicago CRE stakeholders are looking to see whether the teams pony up more private money to start building these stadiums in 2025 or follow through on last-ditch alternatives such as moving the teams out of the city. 

“If the ownership of the Bears wants this sort of stadium … no matter where they're going, they need to come up with some money to do it,” said Collete English Dixon, executive director of the Marshall Bennett Institute of Real Estate at Roosevelt University.

“I think the NFL has helped them by allowing private equity to invest in these things and invest in teams. And so maybe that's going to be their pathway to come up with the resources to make this happen.”

A Central Loop Comeback

Full-year office leasing activity downtown reached 9.1M SF in 2024, the highest annual tally since the pandemic began, according to a year-end Savills report. 

Office stakeholders expect to see that trend continue, buoyed by progress on LaSalle Street office-to-residential conversions, a lack of new office development and major corporate players like Google and JPMorgan Chase committing to the Central Loop. 

“The major trend you're seeing is a stronger degree of confidence by corporate office space users to commit to leasing space for longer periods than they had been over recent years,” said David Burden, principal and vice chair at Colliers.

“There's been some insecurity coming out of Covid, but I think in 2025, we're going to see that pass and we're going to see more confidence in making commitments to leasing space.”

The Thompson Center

Progress on the conversion of the James R. Thompson Center to Google’s new Chicago headquarters is well underway. Curtain walls surrounding the construction are completely off, and glass for the facade is expected to come in February.

The company anticipates it will move into the building at 100 W. Randolph St. in 2026. And executives hope the anticipated completion will lead some companies to set up shop nearby, inking deals as soon as this year to give time for tenant improvements and renovations.

“We've talked to some [companies] that want to be in proximity,” said Allen Rogoway, managing principal at Cresa. “The workforce …  should absolutely infuse the Central Loop retail, and there's buildings in proximity that I think are going to benefit from it.”

Multifamily Opportunity

Two of the nation’s seven strongest rental markets were in the Chicago area at the end of 2024: suburban Chicago and the city itself, according to a RentCafe year-end multifamily report. Year-over-year rent growth in the city was 2.7%, according to a Yardi Matrix report from November.

A lack of new supply on the way should push rent growth higher and open up new opportunities for investors in the city. 

“I do believe we'll see more interest in housing investment [from] both domestic and international capital because we are underhoused, both downtown and then in a lot of our neighborhoods and areas in Chicagoland,” said Michael Fassnacht, Clayco’s chief growth officer and president of the Chicagoland region. “We just don't build enough.”

Construction Costs

Construction costs have remained stubbornly high in the wake of a period of high inflation, and they may not get lower anytime soon. Proposed tariffs from President-elect Donald Trump could “increase construction costs, driving up prices on housing and commercial projects,” according to an analysis from RCLCO.

Fourth-quarter data from construction data and software firm Gordian showed that the cost of building an office in Chicago has grown 17% since 2020. Nationally, the Turner Building Cost Index rose 3.6% in Q3, driven partially by longer lead times on mechanical and electrical equipment.

Abbell Associates CEO Liz Holland said she has faced supply chain delays when trying to redevelop certain assets, which has raised the cost of construction. HVAC units, for example, can take twice as long to deliver for her Chicago projects as they did a few years ago, she said. 

“The biggest challenge to new construction is that the costs of construction have not come down, and that's been hugely frustrating, especially to developers like myself who thought I was so smart in buying land post-Covid and got Covid pricing, and then haven't been able to build anything on it,” Holland said.

Increased Investor Interest

Federal Reserve interest rate cuts haven’t unlocked a flurry of deals quite yet, but a barrage of bombshell transactions could be on the way if capital markets loosen and more players enter the marketplace.

The key factor will be how long investors decide to wait.

With the city’s built-in transportation infrastructure, easy access to fresh water and affordable cost of living compared to peer cities, some experts see Chicago positioned well to take advantage of new investments.

At the end of last month, 601W Cos. reportedly purchased the 30-story office building at 303 E. Wacker Drive for about $63M, and an East Coast investor dropped roughly $104M on two suburban shopping centers. 

“Right now, we're seeing some investors come back into the market to start looking for investments, because their money has to go somewhere,” said Vicky Lee, senior vice president of development for Focus. “But it seems like there's going to be a lot more volatility with interest rates. [I’m] very interested to see if investors start to say, ‘Well, you know what? Volatility will be the norm. Let's just go back in and underwrite the new expectations,’ or whether they'll keep waiting.”