The Doom Loop in Chicago
Member since 2023 · 22 posts · 20 votes
The Doom Loop in Chicago
Most Popular Reply
Jaron WallingPro Member
Rental Property Investor · Indianapolis, IN · Member since 2018 · 4k+ posts · 4k+ votes@Scott E. @David Kieta This exact situation is happening in downtown Indianapolis.
The city county building had numerous plans, ideas, thoughts, to be repurposed but after developers checked it out the repurposing didn't pencil out. It's better to tear it down. Instead the government is moving 550 employees back into the building. It's become a political issue at this point. These locations for growth in growing downtown cities are valuable but the costs to repurpose them is high. Regardless, I'm in the camp to repurpose buildings and make them new.
I enjoy the character that older buildings provide. These types of projects go off with a bang in our market. People love it. Businesses love it. And it's been done multiple times.
30 Replies
- Member since 2023 · 22 posts · 20 votes3y
Office Vacancy needs to dramatically decrease, or the office space needs to be repurposed.
Quote from @David Kieta:
Office Vacancy needs to dramatically decrease, or the office space needs to be repurposed.
Doesn't look like office vacancy will be dramatically decreasing any time soon (or ever).
And repurposing is much easier said than done. I've heard some say that these properties that "need repurposed" should be bought for land value, as the existing buildings are near worthless.
Thoughts? This topic fascinates me. I don't have the answers myself but love the discussion.
- Member since 2023 · 22 posts · 20 votes3y
I think you are correct. Vacancy will not improve. Companies leasing the space cannot force their employees to return to the office, nor should they if employee productivity increases when they work from home.
As for repurposing the space, I think it can be done with the right plan and investors, but it is a huge gamble to take.
Check this article out. An office building in the West Loop in Chicago sold at nearly a 60% discount. https://www.bisnow.com/chicago/news/office/portland-investor...
- 3yJaron WallingPro MemberRental Property Investor · Indianapolis, IN · Member since 2018 · 4k+ posts · 4k+ votes
@Scott E. @David Kieta This exact situation is happening in downtown Indianapolis.
The city county building had numerous plans, ideas, thoughts, to be repurposed but after developers checked it out the repurposing didn't pencil out. It's better to tear it down. Instead the government is moving 550 employees back into the building. It's become a political issue at this point. These locations for growth in growing downtown cities are valuable but the costs to repurpose them is high. Regardless, I'm in the camp to repurpose buildings and make them new.
I enjoy the character that older buildings provide. These types of projects go off with a bang in our market. People love it. Businesses love it. And it's been done multiple times.
- Member since 2023 · 22 posts · 20 votes3y
@Jaron Walling I agree with you. However, I wonder what will actually happen. If effective plans/investments are not made now, major cities will see growth slow down drastically. On the other hand, cities like Nashville cannot keep up with the growth.
Honestly, I don't think the government can fix the situation.
- 3yJaron WallingPro MemberRental Property Investor · Indianapolis, IN · Member since 2018 · 4k+ posts · 4k+ votes
Quote from @David Kieta:
@Jaron Walling I agree with you. However, I wonder what will actually happen. If effective plans/investments are not made now, major cities will see growth slow down drastically. On the other hand, cities like Nashville cannot keep up with the growth.
Honestly, I don't think the government can fix the situation.
Indianapolis can't keep up with the growth either.
Quote from @Jaron Walling:
Quote from @David Kieta:
@Jaron Walling I agree with you. However, I wonder what will actually happen. If effective plans/investments are not made now, major cities will see growth slow down drastically. On the other hand, cities like Nashville cannot keep up with the growth.
Honestly, I don't think the government can fix the situation.
Indianapolis can't keep up with the growth either. YES, I agree the government can't fix the situation. In fact they make it worse in specific situations. We need housing in these locations. Empty building that could be repurposed makes sense but only at the right price.
A way the government can get involved is in the form of grants or tax breaks for developers who are repurposing old vacant office buildings in areas that need more residential units.
This is happening a bit in Manhattan, but it has been so expensive to repurpose that the finished product ends up being luxury apartments/condos that only the wealthy can afford.
If the local government wants more middle class housing they need to get involved and help the developers achieve that.
(btw I'm with you - we should try to save these old historic buildings where we can. It's just tough when they were built 100 years ago as office buildings. Reconfiguring the layouts to residential AND bringing these old buildings up to code is a big undertaking.)
- Member since 2023 · 22 posts · 20 votes3y
Quote from @Scott E.:
Quote from @Jaron Walling:
Quote from @David Kieta:
@Jaron Walling I agree with you. However, I wonder what will actually happen. If effective plans/investments are not made now, major cities will see growth slow down drastically. On the other hand, cities like Nashville cannot keep up with the growth.
Honestly, I don't think the government can fix the situation.
Indianapolis can't keep up with the growth either. YES, I agree the government can't fix the situation. In fact they make it worse in specific situations. We need housing in these locations. Empty building that could be repurposed makes sense but only at the right price.
A way the government can get involved is in the form of grants or tax breaks for developers who are repurposing old vacant office buildings in areas that need more residential units.
This is happening a bit in Manhattan, but it has been so expensive to repurpose that the finished product ends up being luxury apartments/condos that only the wealthy can afford.
If the local government wants more middle class housing they need to get involved and help the developers achieve that.
(btw I'm with you - we should try to save these old historic buildings where we can. It's just tough when they were built 100 years ago as office buildings. Reconfiguring the layouts to residential AND bringing these old buildings up to code is a big undertaking.)
I think Chicago/Cook County government will have a difficult time with this. They should be incentivizing the middle class to move back to the city. However, if they give developers property tax breaks and then turn around and put the burden on the residents already in the city people will leave in greater numbers then they already are.
The local government need to spend less money and decrease the budget for once.
- 3yScott TrenchPro MemberRental Property Investor · Denver, CO · Member since 2014 · 2k+ posts · 6k+ votes
I wonder if Chicago isn't a great place to invest because of this dynamic, and won't be one of the better opportunities in the country in 2024 as a result.
- Member since 2023 · 22 posts · 20 votes3y
Quote from @Scott Trench:
I wonder if Chicago isn't a great place to invest because of this dynamic, and won't be one of the better opportunities in the country in 2024 as a result.
If I was advising an investor, I would say don't invest in Chicago proper. Look to cities like Naperville, Aurora, and Joliet.
- Rental Property Investor · Inlet Beach, FL · Member since 2018 · 199 posts · 111 votes3y
@Scott Trench
I'm wondering, too. Can we hit an ideal time to invest? My wife and I already have a few ideas picked out, but have done 0 market research yet.
- Member since 2023 · 22 posts · 20 votes3y
Quote from @David A Lisowski:
@Scott Trench
I'm wondering, too. Can we hit an ideal time to invest? My wife and I already have a few ideas picked out, but have done 0 market research yet.
I feel like the ideal time is different for everyone. Too many factors to consider.
- 3yJaron WallingPro MemberRental Property Investor · Indianapolis, IN · Member since 2018 · 4k+ posts · 4k+ votes
@David A Lisowski The ideal time to get into REI was yesterday. Even with high prices and higher rates yesterday was the best day. It's a finite resource. Either you chase it or someone else does.
When I describe the last time I rented it feels like I got ran over for 5 years. The movers and shakers (investors) are all over the place but you can't see them. The investors change neighborhoods. I was just renting and stuck on a path. Eventually I escaped it.
- Member since 2019 · 7k+ posts · 4k+ votes3y
Quote from @David Kieta:
Quote from @David A Lisowski:
@Scott Trench
I'm wondering, too. Can we hit an ideal time to invest? My wife and I already have a few ideas picked out, but have done 0 market research yet.
I feel like the ideal time is different for everyone. Too many factors to consider.
I am buying multiple REIT right now as their stock crashes due to dividend cut, take a look at WP Carey that announced they would leave office space investment and cut the dividend by how much percentage ?
When there's blood on street like now, it's good time to invest *selectively* at public company as their valuation is very bad right now.
I would do this for public REIT only though, not private REIT. - Member since 2019 · 7k+ posts · 4k+ votes3y
Quote from @Jaron Walling:
@David A Lisowski The ideal time to get into REI was yesterday. Even with high prices and higher rates yesterday was the best day. It's a finite resource. Either you chase it or someone else does.
When I describe the last time I rented it feels like I got ran over for 5 years. The movers and shakers (investors) are all over the place but you can't see them. The investors change neighborhoods. I was just renting and stuck on a path. Eventually I escaped it.
The ideal time to get into Real Estate is when there's a crash LOL. Now the crash is in office and retail space.
I would buy bonds, CRE REIT, CEF and not look at it for 5-10 years because it's guaranteed to be profitable if I purchase now. - Real Estate Broker · Chicago, IL · Member since 2014 · 2k+ posts · 1k+ votes3y
Quote from @David Kieta:
"A “doom loop” therefore looms for Chicago and many other cities: Commercial leases don’t get renewed, leading to slashed commercial property tax valuations, forcing a higher tax burden on homes, reducing the value of nearby commercial property and so on."
The above is the most important part of this article. Every taxpayer I speak to cannot understand why they are paying more in property taxes. The "Doom Loop" explains why residents in the City of Chicago will have higher assessments in 2024. However, increases in the suburbs and outer counties are due to local government overspending.https://wirepoints.org/new-report-chicago-by-far-the-worst-a...
Thanks for posting this.
- Member since 2023 · 22 posts · 20 votes3y
Quote from @Carlos Ptriawan:
Quote from @Jaron Walling:
@David A Lisowski The ideal time to get into REI was yesterday. Even with high prices and higher rates yesterday was the best day. It's a finite resource. Either you chase it or someone else does.
When I describe the last time I rented it feels like I got ran over for 5 years. The movers and shakers (investors) are all over the place but you can't see them. The investors change neighborhoods. I was just renting and stuck on a path. Eventually I escaped it.
The ideal time to get into Real Estate is when there's a crash LOL. Now the crash is in office and retail space.
I would buy bonds, CRE REIT, CEF and not look at it for 5-10 years because it's guaranteed to be profitable if I purchase now.I am very unfamiliar with CRE, REIT, and CEF. Can I purchase these on my Fidelity investment account?
- Member since 2019 · 7k+ posts · 4k+ votes3y
Quote from @David Kieta:
Quote from @Carlos Ptriawan:
Quote from @Jaron Walling:
@David A Lisowski The ideal time to get into REI was yesterday. Even with high prices and higher rates yesterday was the best day. It's a finite resource. Either you chase it or someone else does.
When I describe the last time I rented it feels like I got ran over for 5 years. The movers and shakers (investors) are all over the place but you can't see them. The investors change neighborhoods. I was just renting and stuck on a path. Eventually I escaped it.
The ideal time to get into Real Estate is when there's a crash LOL. Now the crash is in office and retail space.
I would buy bonds, CRE REIT, CEF and not look at it for 5-10 years because it's guaranteed to be profitable if I purchase now.I am very unfamiliar with CRE, REIT, and CEF. Can I purchase these on my Fidelity investment account?
buy from traditional brokerage.
- Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes3y
Quote from @Carlos Ptriawan:
Quote from @David Kieta:
Quote from @Carlos Ptriawan:
Quote from @Jaron Walling:
@David A Lisowski The ideal time to get into REI was yesterday. Even with high prices and higher rates yesterday was the best day. It's a finite resource. Either you chase it or someone else does.
When I describe the last time I rented it feels like I got ran over for 5 years. The movers and shakers (investors) are all over the place but you can't see them. The investors change neighborhoods. I was just renting and stuck on a path. Eventually I escaped it.
The ideal time to get into Real Estate is when there's a crash LOL. Now the crash is in office and retail space.
I would buy bonds, CRE REIT, CEF and not look at it for 5-10 years because it's guaranteed to be profitable if I purchase now.I am very unfamiliar with CRE, REIT, and CEF. Can I purchase these on my Fidelity investment account?
buy from traditional brokerage.
Woo-woo-woo there, 1 VERY important correction Carlos. Bonds are NOT guaranteed to be profitable, or even pay-out. Bonds CAN go to 0.
I get why Carlos said it as he did, bonds traditionally do pay-out and work fine BUT, there has been times they went to 0 and all invested capital was lost. Good example was '08' when various pension funds lost everything.
No investment is ever a guaranteed profit. They may be very highly probable, but never guaranteed.
- Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes3y
Quote from @David Kieta:
Quote from @Carlos Ptriawan:
Quote from @Jaron Walling:
@David A Lisowski The ideal time to get into REI was yesterday. Even with high prices and higher rates yesterday was the best day. It's a finite resource. Either you chase it or someone else does.
When I describe the last time I rented it feels like I got ran over for 5 years. The movers and shakers (investors) are all over the place but you can't see them. The investors change neighborhoods. I was just renting and stuck on a path. Eventually I escaped it.
The ideal time to get into Real Estate is when there's a crash LOL. Now the crash is in office and retail space.
I would buy bonds, CRE REIT, CEF and not look at it for 5-10 years because it's guaranteed to be profitable if I purchase now.I am very unfamiliar with CRE, REIT, and CEF. Can I purchase these on my Fidelity investment account?
If not familiar FIRST get familiar. Don't just race out and buy a position because someone online mentioned it, put in the work, read-up on it, it's honestly not that hard. And in that you'll also read-up on various trading account options and pro's-con's of each.
I use IBKR and had additional TD accounts that are now Schwab. Keep thinking about making all IBKR but, for now they sit. Different tools for different job's.
Never blindly invest, step 1 is ALWAYS get-informed. Random actions will have random results.
- Contractor · Chicago, IL · Member since 2016 · 4k+ posts · 2k+ votes3y
Thank you so much for sharing @David Kieta!
100% completely agree - The bring Chicago home proposal is HUGE issue that will push more taxes back to ALL housing providers. https://news.wttw.com/2023/08/28/proposal-hike-taxes-sales-m...
The longer-term effects are something we are missing in Chicago and it continues to make things harder and harder for housing providers.
Quality Builders4.966 Reviews - Member since 2019 · 7k+ posts · 4k+ votes3y
Quote from @James Hamling:
Quote from @Carlos Ptriawan:
Quote from @David Kieta:
Quote from @Carlos Ptriawan:
Quote from @Jaron Walling:
@David A Lisowski The ideal time to get into REI was yesterday. Even with high prices and higher rates yesterday was the best day. It's a finite resource. Either you chase it or someone else does.
buy from traditional brokerage.
Woo-woo-woo there, 1 VERY important correction Carlos. Bonds are NOT guaranteed to be profitable, or even pay-out. Bonds CAN go to 0.
I get why Carlos said it as he did, bonds traditionally do pay-out and work fine BUT, there has been times they went to 0 and all invested capital was lost. Good example was '08' when various pension funds lost everything.
No investment is ever a guaranteed profit. They may be very highly probable, but never guaranteed.
It's guaranteed in all practicality, almost like moon and earth, just buy TLT this week and sell in 2027.
I will give you 10% if it's not profitable LOL I spend a lot of time at work thinking about "digital transformation"..... we're going through a physical transformation in terms of how ppl work and live and its impact to our physical commercial property impacting downtown office space, the banks that finance these places, the small businesses that rely on business commuters, the infrastructure facilitating commuters
Chicago is not unique - Indy, Atlanta, etc - https://www.wsj.com/real-estate/commercial/even-a-booming-ec...
- Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes3y
Quote from @Carlos Ptriawan:
Quote from @James Hamling:
Quote from @Carlos Ptriawan:
Quote from @David Kieta:
Quote from @Carlos Ptriawan:
Quote from @Jaron Walling:
@David A Lisowski The ideal time to get into REI was yesterday. Even with high prices and higher rates yesterday was the best day. It's a finite resource. Either you chase it or someone else does.
buy from traditional brokerage.
Woo-woo-woo there, 1 VERY important correction Carlos. Bonds are NOT guaranteed to be profitable, or even pay-out. Bonds CAN go to 0.
I get why Carlos said it as he did, bonds traditionally do pay-out and work fine BUT, there has been times they went to 0 and all invested capital was lost. Good example was '08' when various pension funds lost everything.
No investment is ever a guaranteed profit. They may be very highly probable, but never guaranteed.
It's guaranteed in all practicality, almost like moon and earth, just buy TLT this week and sell in 2027.
I will give you 10% if it's not profitable LOLOh my friend.... Leham Bros. was also a "sure thing", until it wasn't. As was investing with Bernie, Enron, Beanie babies, etc etc etc....
A "sure thing" is far too often the most dangerous thing. Because people are so sure, the fail to pay attention to the rot in the pillars and only realize after it's all collapsed.
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