For Chicago's Construction Experts, The Market Couldn't Be Better
Everywhere you look across the city and suburbs, cranes are in the air and crews are raising buildings as fast as they can. We're in the golden days of development, according to the experts we've lined up for Bisnow's 4th Annual Construction & Development Forum, 7am Thursday, Aug. 25, at the Swissotel Chicago.
Ryan Cos Great Lakes region president Tim Hennelly (left, with Ryan Cos national president Jeff Smith) says Ryan will do $1.5B nationally in business this year, split nearly evenly between development and third-party GC. The Chicago market accounts for $250M of that pie, with 65% to 75% skewed toward development because of the market conditions—Tim says if you're looking to build-to-suit, you need to own the land. In other markets where Ryan does business, like Cedar Rapids, IA, the balance is 85% GC.
What's surprised Tim the most about this cycle is the diversity in Ryan's development interests. Five or six years ago, half of the firm's projects centered on industrial. Now that Chicago is the nation's top industrial real estate market, Ryan is shifting to suburban office and multifamily because of demand. Tim says the suburban office market is ready for new buildings, and Ryan is planning two projects along the I-88 corridor.
As for multifamily, Tim says Ryan is pleased with its forays into senior housing with its Clarendale brand. Ryan is delivering 500 units between three communities: one in Mokena is open; a Clarendale project in Algonquin will be delivered next month; and the final one, in Schererville, IN, will open next spring. Ryan is planning another four or five senior housing communities. In the city proper, Ryan topped off Aurélien at 833 North Clark St last month. Tim says he couldn't be happier about the firm's first Chicago multifamily tower and believes the rental market will remain red-hot when Aurélien is delivered next year.
McShane Construction EVP Mat Dougherty says the demand for industrial and multifamily is fueling his firm's business these days. Mat says multifamily couldn't be a better market, with strong demand across market-rate, affordable and senior housing, including in the suburbs, McShane's bread and butter. Tim says the increase in suburban multifamily development is a result of shifting demographics and oversupply. McShane saw a ton of work on the North Shore the past four years. Now it's working west and southwest of the city.
Mat says construction costs are escalating and construction timelines are longer due to lower capacity in the subcontractor market. Many subcontractors are less inclined to take jobs with low fees, and are doing more work in this cycle with less staff, a reminder of the mistakes made prior to the 2008 real estate crash. Mat says subcontractors are being very disciplined about staffing, and are profiting from it.
To learn more from Mat, Tim and our other expert panelists, please attend Bisnow's 4th Annual Construction & Development Forum, 7am Thursday, Aug. 25, at the Swissotel Chicago. Register here.
