CHICAGO | General Discussions

[the urban politician]

^ I think you maybe are confusing an oversupply situation with a worldwide financial meltdown.

First of all, right now we have no evidence of an oversupply of apartments. Even office right now is showing perhaps only slight signs of that. Will that change? Of course, at some point it may happen soon.

But does that mean that everything will come crashing down, tens of thousands of properties will go into foreclosure, banks will collapse, and the Federal Government will need to come in and infuse nearly a trillion dollars to save the entire financial system like what happened in 2008? Highly unlikely.

[bhawk66]

Originally Posted by the urban politician

^ I think you maybe are confusing an oversupply situation with a worldwide financial meltdown.

First of all, right now we have no evidence of an oversupply of apartments. Even office right now is showing perhaps only slight signs of that. Will that change? Of course, at some point it may happen soon.

But does that mean that everything will come crashing down, tens of thousands of properties will go into foreclosure, banks will collapse, and the Federal Government will need to come in and infuse nearly a trillion dollars to save the entire financial system like what happened in 2008? Highly unlikely.

Agreed. I think I got everyone defending the 2008 meltdown reference by mistake.

Simply stating this has all the earmarks of an overbuild. I shouldn't have connected it to twenty-oh-eight.

Think I should take a back seat here for awhile. I love construction. With a purpose

[the urban politician]

Originally Posted by bhawk66

Simply stating this has all the earmarks of an overbuild. I shouldn't have connected it to twenty-oh-eight.

^ I don't think anyone here is trying to pick on you, but the current residential and office boom actually has none of the earmarks of an overbuild.

For apartments, we continue to see lots of absorption, low vacancy, and rent holding steady.
For office, I believe the last quarter saw an uptake in vacancy. Still though, nothing drastic yet--we will see if that trend holds.
Hotel I believe is the only major downtown sector which showed some of the features of an overbuild and, no surprises, that sector is seeing a slowdown in construction.

[bhawk66]

Originally Posted by the urban politician

^ I don't think anyone here is trying to pick on you, but the current residential and office boom actually has none of the earmarks of an overbuild.

For apartments, we continue to see lots of absorption, low vacancy, and rent holding steady.
For office, I believe the last quarter saw an uptake in vacancy. Still though, nothing drastic yet--we will see if that trend holds.
Hotel I believe is the only major downtown sector which showed some of the features of an overbuild and, no surprises, that sector is seeing a slowdown in construction.

Thanks. Preciated. I can be a bit of a crumudgeon I suppose. And the more I converse with y'all, I started to see my misperception. 4th generation Chicagoan. Proud AF of this city. Couldn't be more grateful as an architect to be from this Sullivan-Meis-Wright-Jahn town. I want great care taken at every corner. Haha. Go Sox! (Cubs, Hawks and Bears too. Screw the Bulls. Go DePaul Though)

[the urban politician]

Plus the Old Post Office. Yes it's not new construction, but functionally it kind of is. It's adding brand new Class A office space to the market, plus it's costing a bigillion dollars for the rehab

[the urban politician]

What we are not seeing now, which we were seeing in 2008, is a lot of banks making residential loans to consumers who perhaps should not have qualified for them. That's why it was called the subprime mortgage crisis. Those loans were packaged and sold off, but somewhere along the way we reached a critical point where those bad loans defaulted, and suddenly banks started to fail. That led to the domino effect that was the 2008 collapse, and suddenly banks had a whole bunch of foreclosed property on their hands that they had to unload.

Today, however, it is unlikely that we will see a bunch of individual consumers default on their residential mortgages. If we do have a correction, it will be in the form of larger landlords defaulting on their office/hotel/apartment complex mortgages.

We did see this in 2008 as well, of course, as a part of the massive economic meltdown. But I think 2008 was unique in that SO MANY individuals defaulted on their home loans, and so many homes lost value compared to the debt they carried, that it overwhelmed the entire system and affected millions of people. That, in particular, was what made 2008 stand out above and beyond a typical recession.

......From my understanding as a person who isn't particularly versed in finance.

[Tom In Chicago]

Also we haven't had a situation where we over-built commercial real estate in downtown Chicago due to spec since the 1980s. . . and we ended that era with a subsequent real estate crash in the early 1990s as all the new office buildings were finishing up. . . seem to remember 633 North St. Clair being something like >95% vacant for years and then converted to hotel. . .

. . .

[Vlajos]

Plan to triple real estate transfer tax gets big backing

"A major Chicago civic group is endorsing a proposal to move to a graduated rate of up to 3.3 percent that would apply not just to "mansions" but commercial property worth at least $5 million.

A major Chicago civic group is throwing its support behind a plan to more than triple the size of the city’s real-estate transfer tax on many sales—a move the group says would raise $150 million a year to fight homelessness but one which would hit buyers and sellers of large office buildings and other commercial property with a new tax bill of millions and sometimes tens of millions of dollars."

https://www.chicagobusiness.com/greg...ts-big-backing

Interesting idea that probably makes some sense, other than the money being used to "fight homelessness". WTF!?!?!?!? The city needs to raise funds to pay pensions, we can't afford new programs and spending.

[the urban politician]

It's a terrible use of money

Use it for something useful, like international marketing of Chicago to the world

[the urban politician]

^ Nice! That's one of the nicer condo buildings--no large podium.

Looking at the website, multiple condos in the millions.

I was just reading in Crains today how multimillion dollar homes in traditional suburban wealthy enclaves continue to have to slash their prices.

It's impossible for these high end condos/townhomes, etc downtown to not be playing a big role in this. Actually, a part of me wonders if downtown luxury is even sapping a bit of life out of the Lincoln Park luxury housing market? Probably not nearly as dramatic as what is happening in the burbs, but we do hear about price cuts for Lincoln Park real estate as well.

I do hope the market equilibrates, though. Having one area of town drain life out of another does not make for a healthy region--especially given how badly our State needs the tax dollars. A zero sum game will not help.

[LouisVanDerWright]

Actually it will help when Lincoln Park and other areas (wicker, Logan, etc) become an ultra vibrant integrated entertainment district for the region. Rich people can live in uppity suburbs in any city, even small places like Detroit or Milwaukee. There are very few places like the city of Chicago between downtown, the lake, Belmont, and Milwaukee.

As I say over and over again, it is not a zero sum game. Moving all these people in from the suburbs into close proximity to one another creates more amenities for them which creates more jobs and also makes the area even more appealing to wealth. Moving all these people into close proximity to one another gets them in contact with one another (at the local amenities) which means more business deals get done, more innovation occurs, instead of everyone pulling into their shitty suburban garage at 5PM every night and checking out. All of these movers and shakers living in Lincoln Park or Wicker Park means 30 or 45 minutes each way more time in each of their lives. That's more time to work, more time for family, more time to spend. More efficient.

No, it's not at all zero sum, not in the slightest. All of these effects are exponential because each amenity that opens up has a non-zero effect on the desirability of the area and in turn has a non zero effect on demand for more amenities (i.e. they employ people who will then spend some of their money going to other shops or restaurants or who may in turn advance their careers and open another shop or restaurant or even innovate and build on what they learned creating new categories of entertainment or dining).

So no, stop calling it zero sum because it certainly is not.

[gandalf612]

Originally Posted by LouisVanDerWright

So no, stop calling it zero sum because it certainly is not.

Couldn’t agree more. Perfectly explained.

[the urban politician]

Originally Posted by LouisVanDerWright

Actually it will help when Lincoln Park and other areas (wicker, Logan, etc) become an ultra vibrant integrated entertainment district for the region. Rich people can live in uppity suburbs in any city, even small places like Detroit or Milwaukee. There are very few places like the city of Chicago between downtown, the lake, Belmont, and Milwaukee.

As I say over and over again, it is not a zero sum game. Moving all these people in from the suburbs into close proximity to one another creates more amenities for them which creates more jobs and also makes the area even more appealing to wealth. Moving all these people into close proximity to one another gets them in contact with one another (at the local amenities) which means more business deals get done, more innovation occurs, instead of everyone pulling into their shitty suburban garage at 5PM every night and checking out. All of these movers and shakers living in Lincoln Park or Wicker Park means 30 or 45 minutes each way more time in each of their lives. That's more time to work, more time for family, more time to spend. More efficient.

No, it's not at all zero sum, not in the slightest. All of these effects are exponential because each amenity that opens up has a non-zero effect on the desirability of the area and in turn has a non zero effect on demand for more amenities (i.e. they employ people who will then spend some of their money going to other shops or restaurants or who may in turn advance their careers and open another shop or restaurant or even innovate and build on what they learned creating new categories of entertainment or dining).

So no, stop calling it zero sum because it certainly is not.

You clearly just don't get what I mean when I state 'zero sum game'.

Yes, it feels good to say this, but at the end of the day I'm so far only seeing evidence that luxury condos downtown are making it hard for luxury property to sell elsewhere. It's a zero sum game in the sense that the property tax pool still stays the same, just shifting. Kinda a key issue here when we've got a bankrupt State.

[LouisVanDerWright]

Originally Posted by the urban politician

You clearly just don't get what I mean when I state 'zero sum game'.

Yes, it feels good to say this, but at the end of the day I'm so far only seeing evidence that luxury condos downtown are making it hard for luxury property to sell elsewhere. It's a zero sum game in the sense that the property tax pool still stays the same, just shifting. Kinda a key issue here when we've got a bankrupt State.

If anyone wants to discuss this further, feel free to respond in the "politics" thread.

But it doesn't stay the same, not if the concentration of wealthy in the core makes the core more attractive. Chicagoland as a whole is gaining more wealthy residents because of what is happening in the core. Yes most are coming in from the burbs, but large numbers of people from outside the metro are also being attracted. Just look at the corporate C suite relocations to downtown we have seen. You don't think a Conagra HQ sold a few multi million dollar condos in the area? Those relocations to downtown are being driven by the dynamism of the Loop and environs.

Even if no additional wealthy are added, the efficiencies I described above will still result in more output with the same number of residents. Even if there were always 10,000 $1 million + homes in Chicagoland and now there's 5,000 in the city and 5,000 in the burbs instead of 2,000 in the city and 8,000 in the burbs, that's still 3,000 more multi millionaire households living in close contact with each other who will do more business, spend more money, start more ventures with each other, etc.

It's ironic that you deny this because it's the process that is paying the bills at your investments around downtown. Even if we aren't gaining new households (which we are) the dense ecosystem of services is employing thousands of people who make decent wages (i.e. you have Au Cheval or Big Star paying $15-20 an hour instead of Perkins and McDonalds paying minimum wage in the burbs) results in increased demand for housing which grows the tax base.

The effects of this process are manifold and explain the existence of cities in general. I will argue all day that the reason Chicago is confronted with the problems it has today in the first place was that we flushed the basics of economies of agglomeration down the drain in the post war era. If Chicago had never carved out it's core with projects and freeways and suburbanized as intensely as it did, it would already be recovered in the way NYC or SF or European cities that chose to rebuild in the old style already have. We are behind the curve because we took the sprawl to the extreme. The sooner we re-condense the sooner we will regain our footing and start attracting migrants en masse. Unfortunately that process is going to require allowing some of our most superfluous suburbs to shrivel up and die. Sorry Barrington, you are gonna have to revert to a cow town on the edge of the city again...

[the urban politician]

Originally Posted by LouisVanDerWright

But it doesn't stay the same, not if the concentration of wealthy in the core makes the core more attractive. Chicagoland as a whole is gaining more wealthy residents because of what is happening in the core. Yes most are coming in from the burbs, but large numbers of people from outside the metro are also being attracted. Just look at the corporate C suite relocations to downtown we have seen. You don't think a Conagra HQ sold a few multi million dollar condos in the area? Those relocations to downtown are being driven by the dynamism of the Loop and environs.

Even if no additional wealthy are added, the efficiencies I described above will still result in more output with the same number of residents. Even if there were always 10,000 $1 million + homes in Chicagoland and now there's 5,000 in the city and 5,000 in the burbs instead of 2,000 in the city and 8,000 in the burbs, that's still 3,000 more multi millionaire households living in close contact with each other who will do more business, spend more money, start more ventures with each other, etc.

It's ironic that you deny this because it's the process that is paying the bills at your investments around downtown. Even if we aren't gaining new households (which we are) the dense ecosystem of services is employing thousands of people who make decent wages (i.e. you have Au Cheval or Big Star paying $15-20 an hour instead of Perkins and McDonalds paying minimum wage in the burbs) results in increased demand for housing which grows the tax base.

The effects of this process are manifold and explain the existence of cities in general. I will argue all day that the reason Chicago is confronted with the problems it has today in the first place was that we flushed the basics of economies of agglomeration down the drain in the post war era. If Chicago had never carved out it's core with projects and freeways and suburbanized as intensely as it did, it would already be recovered in the way NYC or SF or European cities that chose to rebuild in the old style already have. We are behind the curve because we took the sprawl to the extreme. The sooner we re-condense the sooner we will regain our footing and start attracting migrants en masse. Unfortunately that process is going to require allowing some of our most superfluous suburbs to shrivel up and die. Sorry Barrington, you are gonna have to revert to a cow town on the edge of the city again...

^ I totally understand your argument--heard it before a multiple times and it makes theoretical sense.

But in the end I think it's mostly conjecture. I don't know if we have any evidence that we will see greater output and greater wealth generation by simply putting more wealthy households within close proximity to eachother.

And yes, of course I invest in the city--I still think that's where the future of the region's best and brightest will be. But I am not motivated by a disdain for the burbs. The burbs may lose some of their allure but they ain't going anywhere no matter how much you keep saying it; nevertheless I will always root for the city.

[moorhosj]

Originally Posted by the urban politician

It's a zero sum game in the sense that the property tax pool still stays the same, just shifting. Kinda a key issue here when we've got a bankrupt State.

If anyone wants to discuss this further, feel free to respond in the "politics" thread.

Let's not cloud the discussion, property taxes are a local tax. Highland Park is hurting because rich, young families prefer to stay in the city, but the state is receiving the same income taxes.

[the urban politician]

Originally Posted by moorhosj

Let's not cloud the discussion, property taxes are a local tax. Highland Park is hurting because rich, young families prefer to stay in the city, but the state is receiving the same income taxes.

Thanks for pointing this out, my mistake on that

[the urban politician]

I had a chance last year to buy a cheap 3 flat near the Belmont Blue Line, literally 1 block away.

Now that they invested in the new station with the “waterfall” canopy, yet due to that butthole Socialist Ramira Rosa probably blocking any upzonings, look for rents to soar near that station.

Damn I should’ve acted!

Ahhh Rosa. The gift that keeps on giving. The rents will rise even faster. Great leadership

[BorisMolotov]

The majority of those homeless are due to drug addictions or mental illness. Wouldn't the better way to spend the money be in mental health facilities and care? I realize that these are definitely not mutually exclusive and in many ways go hand in hand, but I'm sick of yet more funding for treating only the symptoms rather than the cause. I wish that there was a massive public campaign to reduce stigma of receiving mental health treatment. If I had my druthers that's what I would spend on.

[emathias]

Originally Posted by BorisMolotov

The majority of those homeless are due to drug addictions or mental illness. Wouldn't the better way to spend the money be in mental health facilities and care? I realize that these are definitely not mutually exclusive and in many ways go hand in hand, but I'm sick of yet more funding for treating only the symptoms rather than the cause. I wish that there was a massive public campaign to reduce stigma of receiving mental health treatment. If I had my druthers that's what I would spend on.

I don't know specifically what Chicago plans to spend on, but the national trend is toward "Housing First," which gets people housed so that they have the stability for other treatments to work.