An Insider's Guide to Commercial Real Estate In Chicago

Chicago Commercial Real Estate Market Highlights Need for Exclusive Buyer Rep in Investment Sales

Readers of this blog know we’ve been critical of brokers who apply residential sales principles to commercial real estate – especially commercial foreclosures and short sales. But as commercial real estate brokers selling investment properties in Chicago, we have to acknowledge at least one area in which residential real estate brokers get it right: exclusive buyer brokerage. Exclusive buyer agreements, which are pretty much the norm for home sales and commercial lease transactions in Chicago, are almost nonexistent in Chicago commercial investment sales.

But now more than ever, if you’re buying commercial investment real estate in Chicago, broker representation is critical. Still, a lot of commercial real estate buyers resist working with a broker because they get hung up on a few common myths.

Myth #1: The Best Commercial Real Estate Deals
Don’t Involve a Broker
For whatever reason, broker-less transactions have a certain mystique. But there’s no evidence to suggest that buyers fare better without a broker. In fact, in the commercial transactions we’ve observed, just the opposite is true. Furthermore, today’s market is so rife with potential pitfalls that buying commercial real estate WITH a broker is difficult enough. Doing it without a broker borders on irresponsible.

Myth #2: If You Don’t Use a Buyer’s Broker,
You’ll Save Half a Commission
It’s naïve to assume a seller will automatically take half a commission and put it in your pocket. But even if that seller is willing to kick a couple of points back to a buyer, that buyer has to ask himself, ‘Points off of what?’ In other words, without the counsel of a broker, how does a buyer know he’s getting a) the best price and b) the best terms? You may “save” half a commission, but at what cost?

Myth #3: A Buyer’s Broker Won’t Show Me
All Available Listings
The old-school street broker who limits access to property listings is a dying breed. Commercial real estate brokers in Chicago who are serious about doing deals and building long-term client relationships understand that sharing information and access to listings is how deals get done today.

In today’s market for Chicago commercial investment property there’s both great opportunity and great peril. For a buyer, the difference between finding one or the other is often a broker who’s contractually bound to represent the buyer’s interests through an exclusive buyer agreement.

Peter Lynn & Dan Rosenberg
		Building Equity Commercial Real Estate Web:: buildingequityre.com Email:: solutions@buildingequityre.com Phone:: 773.292.5188

Andersonville Commercial Real Estate: Retail Neighborhood Mom-and-Pops Resilient in the Face of Recession

This month we’re taking a look at commercial investment real estate in Chicago’s Andersonville retail corridor, which runs along Clark Street, approximately from Foster to Bryn Mawr. Like many of the urban retail strips on Chicago’s North Side (Southport in Lakeview, Halsted/Armitage in Lincoln Park and Damen Avenue in Bucktown/Wicker Park), Andersonville has seen commercial rents and property values soar in recent years. But unlike those corridors, Andersonville hasn’t experienced an influx of national retailers, save for Starbucks and a small (8 locations) burger franchise called Hamburger Mary’s. Furthermore, Andersonville doesn’t have the infrastructure advantages of Southport, Damen or Armitage. There’s no direct ‘L’ access, parking is abysmal, and it’s far from the Loop.

That makes Andersonville somewhat of an enigma. With a mix of almost 100% mom-and-pop retailers, Andersonville has maintained retail rents in the $25-to-$30-per-square-foot range for in-line space and the $40-to-$45-per-square-foot range for corner space. In addition, occupancy levels have remained stable despite the economy.

For this reason commercial investment property in Andersonville has begun to attract serious money. Case in point: last year, we represented local investors, RayMark Venture LLC, in the $22.5 million sale of a multi-building retail/mixed use portfolio. (RayMark nearly doubled its investment in just five years). The buyer was a $500-million institutional-advisory fund targeting urban retail real estate in Chicago.

One could argue that Andersonville is supported by a fiercely loyal resident base, but the reality is that its shops and restaurants could not survive on neighborhood traffic alone. So what’s the key to Andersonville’s urban retail success, and why has the neighborhood’s commercial real estate held up so well in a down economy? Holler at us if you have an opinion.

Peter Lynn & Dan Rosenberg
		Building Equity Commercial Real Estate Web:: buildingequityre.com Email:: solutions@buildingequityre.com Phone:: 773.292.5188

Fixation on Distressed Real Estate in Chicago Could Hamper Commercial Property Investors

Interesting article in Sunday’s Chicago Tribune business section: Foreclosures fuel sales to first time homebuyers, may lead to real estate recovery. The dime store version is that foreclosures and distressed real estate in Chicago have created so much interest among buyers that bidding wars are not uncommon, and many Chicago properties are selling over list. At the very end of the article, however, is another interesting scenario. After being rebuffed in several attempts to buy a foreclosed townhome in the Chicago's Northwest suburbs, a buyer wound up purchasing a similar unit through a traditional sale…at a lower price. It’s a revealing commentary. Buyers have become so obsessed with finding the best deals on distressed real estate in Chicago that they’re missing out on the best deals on all real estate. A similar mindset is taking hold among commercial real estate brokers in Chicago. Every day we take calls from brokers who want to know if the seller of this or that listing is in distress. If the answer is no, the conversation often ends right there. Today, people brag about getting a great deal on a foreclosure the way they used to brag about getting in on the ground floor of a new condo development in River North. It’s the new cocktail party chatter. And that leaves us to wonder, are distressed sales and property foreclosures in Chicago the second coming of the herd mentality that created this mess?

Peter Lynn & Dan Rosenberg
		Building Equity Commercial Real Estate Web:: buildingequityre.com Email:: solutions@buildingequityre.com Phone:: 773.292.5188