Photo taken from Cortland Avenue looking into Finkl & Sons

The word is that Depaul University has been considering the Finkl & Sons Steel Mills at Clybourn Avenue and Cortland Street as a place to build a new 10,000 seat basketball stadium so that it could be in the proximity of their Lincoln Park Campus. They are also considering an alternative site just south at Divison and Clybourn.

Site not suitable for Residential

There has been much discussion about a new Depaul basketball stadium in the media as of late, but it?s only recent that they have been naming site locations. The Finkl & Sons site is located on the east bank of The Chicago River at Southport Ave, and Cortland Street within steps of DePaul?s main campus and due to its heavy industrial use over the past 100 years the site is believed to be to contaminated for many real estate re adaptations. So it seems the current thinking is that instead of removing all the over-sized foundations so closely positioned by the rivers edge that it might be far simpler and safer to just remove all the top soil, pave over the site and any possible contamination.

Its has always been a touchy subject for DePaul athletes that their venue is 15 miles off campus in Northwest Suburban Rosemont over a more local stadium

Finkl to move to the South Side

Finkl Steel in the meantime will continue their move from their longtime site to the south east side of the city. In November they bought 13 acres of land in the Stony Island neighborhood from the City of Chicago for $1.00 (Glad I wasn?t their broker) Work had begun quickly after for their arrival. The $250 million a year Finkl and Sons is the world’s leading supplier of forging die steels, plastic mold steels, die casting tool steels and custom open-die forgings, processing over 100,000 tons of steel each year, and then distributed domestically and to more than 18 countries worldwide all while sitting quietly on the banks of the Chicago river between the beautiful neighborhoods of Depaul, Lincoln Park and Bucktown.

We’d like to thank Payton Chung for kindly sharing today’s photo via the Creative Commons’ License.

5 November 2009 ? An embattled development, located in the heart of the loop, recently announced multiple new retail tenants. Scheduled to open by Thanksgiving, the retail portion of Block 37 experienced some trouble as its proposed anchor tenants Movico and David Barton’s Gym pulled out of their agreements. However, Block 37 may be able to meet its planned opening for the holiday shopping season by signing a new group of smaller retail operations that include both local and national chains. These tenants include, among others, Sephora, Michelle Tan, L’Occitane, Comic Vault, and Alternative Shoes. The project’s developer is currently fighting legal action taken by Bank of America.

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.

We would like to thank jrjenks for sharing today?s photo via the Creative Commons License.

Auction signs have gone up where the Congress Highway goes through the Old Post Office

For the price of a condo, you very well could buy 2.7 million square feet in downtown Chicago.

Sadly, after 13 years of failed re-development efforts, the US Postal Service is auctioning off what was once described as the world?s largest Post Office with a suggested opening bid a measly $300,000. Hard to believe that at its peak, 5,000 workers processed more than 35 million letters annually, using 10 miles of conveyor belts and 48 elevators. The building was vacated in 1996 when the Postal Service built a new more technologically advanced building just a block away. Since then, many development plans, including a data storage facility, condos and a hotel, have come and gone as market conditions changed.

While one might argue that $300,00 might seem like a steal for this amount of space in downtown Chicago, keep in mind that it?s not so much the acquisition cost but the development cost and the annual maintenance costs. Even in its current vacant state, the cost for utilities, maintenance and security is approximately $2.5 million annually.

The behemoth, which is nine stories tall with 14-story corner towers, is several blocks southwest of the Loop, the downtown central business district. It was designed by Graham, Anderson, Probst & White in a Neoclassical/Art Deco style and built in phases from 1921 to 1932. The total cost was $22 million. A peculiarity of the building is that it was built using air rights over railroad tracks that terminate several blocks to the north, at Union Station, and so it has no basement. In addition, the Congress Expressway literally passes through the structure.

The auction, to be held on August 29, 2009, is one of many that the Postal Service expects to conduct as it begins a major downsizing effort aimed at aligning capacity with declining volume. As the mail sorting process becomes more automated, we may see more auctions like this one unfortunately.

(Stacy Braack contributed to this post.)

We would like to thank Thomas Merton for sharing today’s photo via the Creative Common’s License.

8 July 2009 – The mortgage backed bonds opened up slightly favorable today and have continued to gain momentum. The bonds are currently up 31 bps and if they can hold this gain we may see rates continue to improve. However earnings will start to come out over the next week, which will have an impact on the bond market. Whether that impact will reduce rates or increase rates is hard to tell. Some reports state earnings will not be as bleak as predicted and if the stock market rallies on that news, rates will once again increase. We are currently seeing the 30 year rate fluctuate at 5% to 5.25%.
For those buyer?s who may want to get the coveted 4.625% rate, my recommendation would be to look at the 10/1 Arm. One can easily get 4.625% to 4.75% and have a long-term rate available to them. I would consider this for first time buyers who intend to move prior to the 10/1 Arm Adjusting.
Currently the Dow is down almost 60 which is helping the bond market to increase. Also, oil prices are tumbling which will bring welcome relief to the gas prices.

The Old Post Office was used extensively in the last Batman movie

The Postal Service has decided to auction off the site of the old post office at 433 W Van Buren. Built in 1932, this building straddles the Eisenhower Expressway and is on the National Register of Historic Places. It was the largest postal facility in the US, but was vacated in 1995 when the USPS moved this facility to a nearby location on Harrison St. This structure is 14 stories tall and over 2.5 million square feet.

Since 1999, The USPS has attempted to sell the old post office to Walton St. Partners. Walton St. has developed a $300 million plan for the building which would include a hotel, office space, condominiums, and a park. They have spend a great deal of time to obtain plans, rezoning, public subsidy, and financing. Due to the current market, financing this endeavor has been a challenge. The USPS has a budget deficit and is paying several million each year to maintain this empty building. They are no longer willing to wait for Walton St. to finalize their plans.

2.5 Million Sq. Ft. in Downtown Chicago for the Price of a Condo?

When a property is unique and difficult to price, an auction is often the best way to receive the best price in the shortest amount of time. The Postal Service has hired Rick Levin & Associates to conduct an open auction for this site on August 27. The suggested opening bid is $300,000 and the building must be sold.

We’d like to thank FHKE for sharing today’s photo via the Creative Commons License.

Chicago's Famous and Highly Recognizable Marina Towers

The Illinois Association of Realtors is reporting that March home sales in Chicago were up 40.6% over February. February 2009 saw 840 transactions and there were 1,181 in March. However, year-on-year the numbers are way down, with a drop of 42.2% (down from 2,044 in March of 2008).

Chicago’s prices are proving to be sticky?the median price in March was $220,000, which is an increase of 0.8% over the median price of $218,125 for February 2009. However, once again the year-on-year numbers are far more grim: prices are down 26.9% when compared to the median price of $300,980 seen in March of 2008.

We’d like to thank Laffy4k for sharing today’s picture via the Creative Common’s License.

Sunset on the South Loop?

Between 1990 and 2000, according to the census, the South Loop’s population increased by 39 percent?the third largest neighborhood population increase in Chicago for that 10 year period. That the area’s growth and popularity had grown was obvious and apparent in both housing costs and real estate values. Growth continued and rates rose due to the popularity of the South Loop neighborhood.

What has changed since the population increase are the types and sizes of businesses that were able to survive the drastic increase in rents. For businesses whose lease was signed before the population increase, retail rents were a bargain.

Many Changes in the South Loop

However, in today’s lean times, the rates charged for commercial space in the South Loop seem to be artificially high. The vacancy rate for retail and commercial space in the South Loop reflects what is happening in the downtown CBD, as reported in the major Chicago newspapers over the past few days. The retail in the South Loop market continues to have a high vacancy rate due to asking prices.

Hopefully as potential retailers decide to take advantage of the South Loop, landlords will be more realistic with their asking prices and the South Loop will continue to grow.

We’d like to thank Joe M500 for so generously sharing this post’s photo via the Creative Common’s License. Thank you Joe!

Rendering of 155 N. Wacker Drive Being Developed by The John Buck Co.

CoStar is reporting that Ernst & Young have signed a 10-year lease for 203,618 square feet at The John Buck Co.’s new office development at 155 N. Wacker Drive. According to The John Buck Co’s web site, the 46 story, 1.13 million-square-foot office tower is scheduled to be completed in July of 2009. Costar is reporting that asking rent in the building is $33 per square foot.

This creates a bit of a problem for The Sears Tower, where Ernst & Young are currently their largest tenant, leasing almost 387,000 square feet.

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Locked

The AP is reporting that 2009 is likely to be a difficult year for commercial real estate. Real Capital Analytics is quoted as saying that $25.7 billion of commercial property are currently bank-owned or in default. They are projecting that this number will likely more than triple in 2009 to $80.9 billion.

At least part of the situation is rooted in the credit crisis and the lack of available capital. Marcus & Millichap Real Estate Investment Services and National Real Estate Investor magazine surveyed 1,100 investors in October and found that 40 percent would need to refinance at least part of their portfolios this year. However, an appeal by a commercial trade group to the Bush administration to be included in the $700 billion bailout (TARP) has not yet been answered by the Treasury Department.

On top of financing problems, there is a drop in demand for store space due to so many retailers going out of business. Marcus & Millichap are expecting an 11 percent vacancy rate this year. This is, of course, going to put downward pressure on rent rates. It looks like 2009 will mark the beginning of a market where tenants are going to have the upper hand over landlords in negotiations.

High vacancy rates, lower rents, and tight credit are all a recipe for a very difficult time for commercial landlords.

It only takes a short walk near my Lakeview home, along the commercial streets of Halsted and Broadway to see that this will hold true for Chicago as well. The demise of large tenants like Linens ‘n Things are going to gaping holes in shopping districts. But equally disturbing is the rise in the number of soaped up windows that were once little boutiques, inviting galleries, and glittering knick knack shops. As I walk by the still open, but all-but-empty little stores, I can only imagine that there will be many more papered windows in my neighborhood soon.