Southland poised for financial progress
Analyst says area to benefit as economy rebounds from virus
South suburban retail and residential real estate markets are in good shape as the economy rebounds from the COVID-19 pandemic, an analyst said Tuesday during a lunchtime seminar in Orland Park.
Consumers have cash in their pockets and are itching to spend it. Young Chicago couples starting families are looking for more space and scooping up singlefamily homes in the Southland, presenters said.
Stores follow rooftops, they said. Millennial and Generation Z homebuyers will drive demand for retail growth in the near future, said Brandon Svec of Homewood, director of market analytics for Chicago-based CoStar Group.
“People want to get out and converse, shop and be entertained with other people,” Svec said during an event at the Orland Park Civic Center.
Svec presented data that he said showed the south suburbs are attracting more urban dwellers from Chicago than pricier areas north and west of the city.
“We have a phenomenal housing market,” Svec said. “You can get more space in the south suburbs than anywhere else.”
That’s important as young families seek residences with spare room to work from home, he said. New buyers potentially have higher incomes and more education than baby boomers who are downsizing and selling homes where they raised children, he said.
“If you want a healthy retail sector you need a healthy consumer,” Svec said. “We have lots of people with money.”
That’s because while 2020 saw historic job losses due to the pandemic, government assistance stabilized incomes for the most part, he said.
“The federal government has gone through extraordinary steps
to prop up consumers,” he said. “Consumers are coming out of a 12- to 18-month lockdown with more money in their pockets than ever before and they’re anxious to spend it.”
People unable to spend cash on entertainment or at restaurants bought vehicles and homes, he said.
“Chicago-area home sales were up 32% in December 2020 compared to December 2019,” he said. Sales for all of 2020 increased 8% over 2019, he said. Most of the growth was in the latter six months of 2020.
“If we were to annualize the back half of 2020, home sales would have been up 15% year over year,” he said.
People want singlefamily homes, as opposed to condos or other multifamily housing.
“The millennials are coming,” he told an audience of about 50 people. “You just need to be ready for them.”
Chicago-area commercial rental rates took a 4% hit during 2020, Svec said. But big dips in demand for properties near downtown Chicago accounted for most of the losses, he said. Rents were mostly stable in the suburbs, he said.
“Retail is not dead,” he said. “It’s just being reimagined.”
CoStar tracked 244 commercial leases signed in the south suburbs during 2020, he said. Only six were for spaces of 15,000 square feet or more: Five Star Furniture in Oak Lawn, Dick’s Sporting Goods Warehouse Outlet in Orland Park, Burlington Coat Factory in Crestwood, Harvey Furniture Plus in Harvey, Dollar Tree in Markham and Jet Foods in Park Forest.
Business tenants today are more likely to sign shorter-term leases for three years as opposed to five or 10 years, Svec said.
“The word of 2020 was uncertainty,” he said. “When businesses are uncertain of the future, they don’t make long-term leasing decisions.”
The overall suburban commercial real estate vacancy rate of 6.5% is relatively healthy, he said. Malls have a higher vacancy rate of 8.9%, but neighborhood shopping centers are doing well, he said.
“We think there are reasons to be hopeful about the future,” Svec said.
The Southland is outperforming other regions of the Chicago-area economy, he said, with fewer commercial vacancies during the past year.
“In terms of store closures, when we look at the south suburbs we’re not seeing the same level of outflows as other parts of the region,” he said.
The south suburbs lost 180,000 square feet of occupied commercial space during 2020, which accounted for less than 10% of all business vacancies known to have occurred last year in the Chicago area, he said.
“The south suburbs are poised to outperform the rest of the Chicago area over the next two to three quarters,” he said. “There is strong pent-up demand.”
Oak Lawn-based HRE Real Estate Services organized Tuesday’s seminar, it’s first in-person group event since 2019. The company seeks to build relationships that lead to investment in the region, said Ken Houbolt, HRE president.
“We see so many opportunities for business,” Houbolt said. “We thought it we could get real estate professionals, government officials and businesses together, maybe we could move things along.”
Orland Park Mayor Keith Pekau welcomed the limited number of visitors to the town’s spacious civic center, where small groups sat at tables. Most guests wore masks unless they were eating or drinking. Box lunches were served.
“We’ve been able to host several events safely since June,” Pekau told me. “I think it’s good to get out. We need to hear about what’s happening in the marketplace.”
More people are being vaccinated for COVID-19. Organizers of conferences and events are looking forward to resuming inperson activities.
“I think people want to be safe, but at the same time they want to get out of the house, they want to come to events,” Houbolt told me. “Given the weather, it’s a pretty good turnout today.”
Svec said he planned to attend in person but that heavy snowfall prevented him from leaving his home in Homewood. He delivered his presentation via video conference.
Alsip Mayor John Ryan said a business owner he met at the inaugural 2019 HRE event in Oak Lawn ended up investing in a project in his community.
Justice Mayor Krzysztof Wasowicz asked Svec how his analysis took into account the state’s population loss.
“All these forecasts are pretty rosy,” Wasowicz said. “How do those forecasts match with reality on the ground?”
While Illinois has lost population, four suburban counties have gained residents, according to a recent analysis.
“Yes, people are leaving Illinois, but they’re also leaving Chicago and moving into the south suburbs,” Svec said. “There’s a phenomenal opportunity here in the south suburbs.”
A Tinley Park man’s massive holiday lights display will help some people who are behind on their mortgage or electric bill, and assist families in keeping food on their table.
Dominic Kowalczyk has a collection box seeking donations for the nonprofit Together We Cope near the display at his home in the 17300 block of Avon Lane.
He recently dropped off a donation of a bit more than $32,000 for the Tinley Park organization, which works to prevent homelessness, topping last year’s collection of $21,000.
“It was an amazing donation,” Kathy Straniero, executive director of Together We Cope, said Tuesday. “It just took my breath away.”
“This $32,000 is a gamechanger,” she said. “The money will be spread across many areas.”
Kowalczyk’s layout draws residents from Tinley Park and surrounding communities each year and features thousands of Christmas lights and animated displays.
In 2013, he was featured on ABC television’s “The Great Christmas Light Fight,” in which 20 homeowners from around the country competed for a share of $250,000 in prize money.
That year he put out a box to raise funds for the Susan G. Komen Foundation, collecting more than $1,500.
In 2014, he started collecting for Together We Cope, and that holiday season garnered $4,100 in donations.
Assistance from Together We Cope helps families
in nearly 30 south and southwest suburbs, and demands for assistance have increased during the COVID-19 pandemic, as job losses in sectors such as the hospitality industry have brought more people to its doors, Straniero said.
A food pantry had to temporarily cut back to serving people for four hours a day four days each week from the regular sixhour days five days a week, but the demand remained the same, with patrons driving up to get deliveries rather than coming into Together We Cope’s building
at 17010 Oak Park Ave., she said.
The organization saw a hit to its income last year after Gov. J.B. Pritzker’s executive orders shuttered nonessential retail businesses, such as Together We Cope’s resale shop that regularly generated $6,000
weekly in revenue, she said. The organization was able to secure a Paycheck Protection Program loan of $125,000 to keep staffers on the payroll.
Pandemic-related restrictions also put a hold on fundraisers, but the pandemic also brought out
fresh donations from strangers, Straniero said, with checks for $200 or $500 arriving regularly.
“Everybody wants to do something to help and that’s what we’ve seen,” she said.