An Unpopular Opinion?
Many Chicagoans are still reeling with disappointment over Chicago?s loss of the 2016 Olympics. But the impact on the near south and South Loop real estate markets may have been less than positive after the flame was extinguished.
While 2016 is a long way off in real estate time, the recent market crash has taught us all to plan further into the future. I have quietly held an unpopular opinion regarding the long term impact of the Olympics on our city. Olympic-based funding and other investments would certainly have fueled infrastructure, commercial, and residential development leading up to and during the events, but the aftermath was a subject rarely discussed in public forums.
A healthy, sustainable real estate market requires a balance between supply and demand. Supply includes commercial and residential units available for sale and rent, as well as funding required to buy or lease these properties. This supply would have undoubtedly increased markedly with the increase in demand prior to and during the events. Olympic-related jobs would have provided income for purchase and rent of these properties, and commercial enterprises would have set up shop to serve workers and visitors at a record pace. Following the closing ceremony, however, visitors return home, jobs end, and demand would have dropped off drastically.
This imbalance would have had a significant negative impact on existing property in and around the Olympic venues. Empty commercial space does not indicate a healthy neighborhood to potential buyers, and I wholeheartedly believe that prices of residential properties in both near south and South Loop neighborhoods would have taken a serious hit in pricing. As we have recently seen, high levels of inventory take years to absorb. Nothing good comes of an oversupply situation. Post-Olympic buyers would not have benefited either – there wouldn’t be enough of them to take advantage of the situation.
The lessons learned in the past several years should have influenced how we understand supply and demand within the marketplace. Healthy markets result from slow, consistent activity, not huge, one-time events. I am in this market for the long haul, and still hold my unpopular opinion.