Did you miss this year’s Economic Outlook event?
In January, MORe hosted talks on what you need to know about the region’s economy by Brandon Svec, Director of Market Analytics at CoStar, and William Strauss, Senior Economist and Economic Advisor at the Federal Reserve Bank of Chicago. But for all the members who couldn’t make it, we’ve put together some key insights here.
In 2020, you can expect:
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Modest growth for the economy and local real estate
A recession is marginally more likely in 2020 than it was in 2019, but it remains unlikely, according to Strauss. While market growth in Illinois and Chicago lags behind the national average, that shouldn’t hamper these local gains.
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A boom in suburban, single-family units, thanks to millennials
As we’ve noted for years, there’s been pent up demand for homes among millennials. Now, this generation is starting to establish careers and families and looking to finally become homeowners. Svec predicts this will cause the suburban, single-family sector to boom in the next ten years.
According to Svec, millennials looking to purchase single-family units are opting to move to the suburbs to raise children. In Chicagoland, Will County is seeing the greatest benefit of this trend.
Svec says it’s a misconception that millennials want specialized amenities and luxury apartments. Their needs are simple: they want new inventory, train access to Chicago, good school districts and relatively low costs.
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Slight dips in suburban multifamily rent and occupancy rates in 2020
It’s been a good time to be a multifamily landlord. The past year saw continued steady rent and occupancy growth in many Chicagoland counties. This sustainable, steady growth won’t disrupt the market the way that big rate jumps can. Svec predicts suburban multifamily rent growth will slow by just one percent in 2020.
Occupancy rates across Chicagoland counties look slightly less promising. Svec credits this to developers overestimating the depth of demand for luxury assets. The spikes in developing suburban multifamily units are why some counties are seeing vacancy ratings grow.
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A continued oversupply of Chicagoland commercial retail and office space
The suburban retail market softened in 2019 as leasing volumes slowed and grocery and retail closures increased. However, restaurants, discounters and fitness centers continue to drive absorption. Fifty-one percent of the average person’s food budget goes to restaurants and bars, so as long as the economy remains strong, this remains a relatively safe investment for commercial REATORS®.
While the trend toward urban office space continues, certain suburban markets are showing strength. Svec predicts that the needs of suburbanizing millennials and aging baby boomers will provide new opportunities for suburban office space.
You should feel comfortable with these modest growth opportunities for 2020. There are no signs of this being a boom or a bust period for real estate, which indicates a stable year ahead.