I asked AI (as is my wont) - and it failed to mention the one thing I think we all know is a major factor - white flight due to black violence. This is what it blames:
The value of commercial property in Chicago has seen a significant drop due to a combination of factors:
Pandemic Impact: The COVID-19 pandemic has reshaped the commercial real estate market, altering how businesses view and utilize office space. This has led to a shift in demand patterns, with Chicago facing a particularly steep uphill battle to regain its pre-pandemic vibrancy¹.
High Property Taxes: Chicago's commercial property taxes are significantly higher than the national average, with a tax rate of 3.78%. This places a heavy financial burden on businesses, affecting their operational costs and overall willingness to invest in office space within the city¹.
Decreased Demand for Office Space: A study by VTS highlights a continuous decline in the demand for office space in Chicago, suggesting a potentially prolonged path to recovery. This trend is especially concerning as it contrasts with some cities where demand has nearly returned to pre-pandemic levels¹.
Interest Rates and Borrowing Constraints: High interest rates have led to constricted borrowing, diminishing property values and putting commercial property sales on a downhill slope. In 2023, Chicago-area commercial property sales were down 44% from the previous year².
Discounted Property Sales: There have been instances of distressed office buildings being sold at significant discounts, such as an 89% discount for a property near the Willis Tower. This reflects the market’s volatility and the challenges property owners face in offloading distressed assets¹.
In response to these challenges, initiatives have been announced to revamp vacant downtown buildings, aiming to rejuvenate the area by repurposing buildings for various uses¹. These efforts represent a move towards recovery and growth for Chicago's commercial real estate market.
I asked AI (as is my wont) - and it failed to mention the one thing I think we all know is a major factor - white flight due to black violence. This is what it blames:
The value of commercial property in Chicago has seen a significant drop due to a combination of factors:
Pandemic Impact: The COVID-19 pandemic has reshaped the commercial real estate market, altering how businesses view and utilize office space. This has led to a shift in demand patterns, with Chicago facing a particularly steep uphill battle to regain its pre-pandemic vibrancy¹.
High Property Taxes: Chicago's commercial property taxes are significantly higher than the national average, with a tax rate of 3.78%. This places a heavy financial burden on businesses, affecting their operational costs and overall willingness to invest in office space within the city¹.
Decreased Demand for Office Space: A study by VTS highlights a continuous decline in the demand for office space in Chicago, suggesting a potentially prolonged path to recovery. This trend is especially concerning as it contrasts with some cities where demand has nearly returned to pre-pandemic levels¹.
Interest Rates and Borrowing Constraints: High interest rates have led to constricted borrowing, diminishing property values and putting commercial property sales on a downhill slope. In 2023, Chicago-area commercial property sales were down 44% from the previous year².
Discounted Property Sales: There have been instances of distressed office buildings being sold at significant discounts, such as an 89% discount for a property near the Willis Tower. This reflects the market’s volatility and the challenges property owners face in offloading distressed assets¹.
In response to these challenges, initiatives have been announced to revamp vacant downtown buildings, aiming to rejuvenate the area by repurposing buildings for various uses¹. These efforts represent a move towards recovery and growth for Chicago's commercial real estate market.
Source: Conversation with Bing, 21/04/2024 (1) Chicago’s Commercial Real Estate & An 89% Loss. https://www.reallawchicago.com/chicagos-commercial-real-estate-an-89-loss/. (2) Chicago-area commercial property sales down 44% in 2023. https://www.chicagobusiness.com/commercial-real-estate/chicago-area-commercial-property-sales-down-2023. (3) Chicago-area commercial property sales down 44% in 2023. https://bing.com/search?q=reason+for+drop+in+commercial+property+value+in+Chicago. (4) Local commercial property sales hit 10-year low - Crain's Chicago Business. https://www.chicagobusiness.com/commercial-real-estate/local-commercial-property-sales-hit-10-year-low. (5) Chicago commercial properties price gains among best in the world .... https://www.chicagobusiness.com/commercial-real-estate/chicago-commercial-properties-price-gains-among-best-world.
It didn’t even mention WorkFromHome?
I think that is covered by effects of covid (?)