Sector shows signs of life locally, especially in multifamily and mixed-use developments

Like a majority of the United States, the Chicago commercial real estate (CRE) market has been in a malaise for the past several years. Recently, however, subtle changes in perspective and investment can be seen in the city and surrounding communities.

The landscape of CRE in the Chicago area is always evolving and is shaped by many factors, including the economy, market demands and regulatory changes. In this dynamic environment, lenders like Wintrust play a pivotal role in the foundation of commercial real estate in Chicago and greater Midwest, making it important for these institutions to stay on top of the trends in key regions.

Construction Challenges

The foundation of commercial real estate often begins within the construction sector, where new projects bring new life into communities and economies alike. In recent times, the construction outlook has experienced a degree of restraint, owing in part to the challenges posed by a rising interest rate environment. This environment has made it increasingly demanding to realize viable construction projects, impacting the amount of lending available.

Despite these challenges, new investments in Chicago and specific segments within construction lending are beginning to sprout. Recent announcements around Chicago’s central Loop include JP Morgan Chase’s commitment to modernize their offices in the Chase Tower and Google’s decision to begin renovations on the Thompson Center. In the surrounding neighborhoods, Wintrust recently financed the mixed-use project at the former Sears building at Chicago’s Six Corners district in Portage Park, which includes 206 luxury apartment units, and the newly opened Target, which houses a CVS pharmacy. Investments from major businesses in these communities are what make the difference.

Multifamily projects, as well, have continued to draw significant interest. Within the multifamily domain — and primarily due to rising costs for urban towers — the focus has shifted towards suburban multi-building projects with community-oriented, walk-up style apartments emerging as a popular choice among developers and investors alike. The fundamentals are strong, and numerous studies have reported Chicago’s rent growth is outpacing the national average.

Great opportunities exist in today’s CRE market, especially in Wintrust’s hometown. “It just takes some confidence in your strategy and a little creativity,” says Bart Johnson, CRE market head of Wintrust Financial. “We’re here to help with both.”

Local Roots

With Chicago roots, Wintrust has extensive insight into the region and what local clients need. Wintrust is proud to invest in projects that help strengthen the community’s development for generations to come.

“Our investment approach aligns with our commitment to the communities we serve,” states Johnson. “As Chicago’s Bank®, it’s important for us to participate in building communities throughout the area by adding housing units, retail destinations and entertainment options.”

Additionally, commitment to community impacts should extend beyond finance, as evidenced by Wintrust's strategic investment in underserved areas such as North Lawndale on the West Side. By aligning its lending activities with community needs and aspirations, Wintrust fosters economic growth and nurtures sustainable development.

“As a bank, we take great pride in establishing one of the first branches in North Lawndale in over 30 years,” says Johnson. “Of course, we want to assist our real estate developers and financiers, but it’s also important to be good community partners. So when we became aware of a large industrial distribution center being built there, we felt it was important to participate as the lender on that project and provide support for its realization.”

Role of a Trusted Lender

Wintrust Commercial Real Estate stands as a strong presence, with over two decades of active engagement in the CRE space and portfolio management exceeding $9 billion. Over the past three years alone, Wintrust has averaged nearly $3 billion in new loans annually, extending its footprint not only across the vibrant Chicago and Milwaukee markets but also spanning coast to coast, from Southeast Florida to Seattle.

“Over the past several years, we have really expanded our reach, not only in multifamily but also in industrial and distribution, student housing, self-storage and medical office throughout the nation,” Johnson says.

As we navigate the intricate landscape of CRE in the Midwest, it’s evident that dynamic factors such as economic trends, market demands and regulatory changes continue to shape the industry. Despite challenges posed by a rising interest rate environment, segments within construction lending remain resilient.

Wintrust Commercial Real Estate exemplifies a strategic investment approach that not only aligns with regional dynamics but also prioritizes community impact and sustainable development. As we move forward, collaboration between stakeholders and a proactive approach to addressing evolving trends will be essential in fostering continued growth and resilience within the commercial real estate sector.

Connect with Wintrust to learn more.