This document provides a summary and outlook of the Chicago commercial real estate market in early 2020. It recaps the trends of 2019, including multifamily fundamentals like declining vacancy rates and rising rents. Construction activity was pulling back after heavy development. The author projects continued rent growth, absorption, and high property values in 2020. It also details the impact of recent property tax reassessments, with commercial properties in some areas seeing tax increases up to 47%. Questions are asked about how investors should prepare for potential higher taxes going forward.

1. Chicago Commercial Update
A Recap of 2019 and Look at 2020
January 2020
Brandon Svec, Director & Market Economist

2. Agenda
• Demand Drivers
• Recap of 2019 and Looking Forward to 2020
• CRE Taxes and the 2019 Reassessments
• Questions

3. Demand Drivers

4. Chicago Employment Market At A Glance

5. Employment Growth Geographically Bifurcated

6. City of Chicago Population and Household Trends
Source: Census Bureau
% Change 2010 - 2018
0.56%
2.24%
-2.74%
8.65%
5.72%
-4.00%
-2.00%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
Population Households Family Households Nonfamily
Households
Single Households

7. City of Chicago Population Age Breakout
-80,000
-40,000
0
40,000
80,000
0
200,000
400,000
600,000
800,000
0-19 20-34 35-54 55-64 65+
Total Change since 2010
Total Population Change since 2010
Source: Census Bureau

8. Cook County Homeownership Rate Trends

9. S&P/Case-Shiller Price Index – Chicago v National
Chicago
National

10. Recap of 2019 and Looking Forward to 2020

11. Chicago Multifamily Fundamentals

12. Stabilized Vacancy Hits Cycle Low

13. Daily Vacancy Across Neighborhood Clusters

14. Construction Activity Pulling Back

15. But Heavy Activity Continues in Certain Areas

16. Rents Continued Steady Ascent in 2019

17. Daily Asking Rents By Neighborhood Cluster

18. Apartment Values Hit Record High in 2019

19. Reading the Crystal Ball for 2020
New Deliveries – 4,100 units Net Absorption – 5,400 units Vacancy – 5.9%
Rent Growth – 2.3% Sales Volume - $3.2 Billion Cap Rate – 6.2%

20. Trends We’re Watching in 2020
• Chicago’s fiscal situation
• Pace of office-using job growth
• Spread between value of for rent and for sale housing
• Interest rates
• Millennial migration trends
• Impact of new assessment valuation methodology
• Investors risk appetite towards Chicago

21. 2019 Reassessments and CRE Taxes

22. A Case Study on Evanston
• Just recently reassessed in
2019
• Strong apartment market that
stands as barometer for
Downtown and Northside
neighborhoods

23. Comparison of 2016 vs 2019
125% Increase!!!

24. Burden on Evanston Commercial v. Residential
2016 2019

25. What Is the Net Result?
Total Levy (all taxing districts) 246,769,814$
Total Assessed Values 1,553,615,124$
2018 Equalizer 2.9109
EAV 4,522,418,264$
Tax Rate on All Property 5.46%
Previous Commercial Burden 67,368,159.22$ 27.3%
New Commercial Burden 99,522,265.99$ 40.3%
Estimated Tax Increase 47.7%
Previous Commercial Tax Rate 24.2% 277,925,121$
New Commercial Tax Rate 15.9% 626,513,991$
Previous Residential Tax Rate 24.2% 740,113,000$
New Residential Tax Rate 15.9% 927,101,213$
Estimated Tax Decrease -17.81%
City of Evanston 2019 Property Tax Estimate

26. The Commercial Increase is Across the Board

27. How do investors prepare?

28. What about 2021???
Township Apartments Commercial Industrial
Rogers Park 8.5 - 10.25 9.0 -10.5 9.5 - 10.5
Lake View 8.25 -10.0 8.75 - 10.0 9.50 - 10.0
Hyde Park 8.75 - 10.25 9.50 - 10.75 9.50 - 11.0
Jefferson 8.25 - 10.25 8.50 - 10.25 9.50 - 10.50
Lake View 9.0 - 10.25 9.25 - 10.50 9.50 - 11.50
West 9.25 - 11.00 9.25 -11.75 9.50 - 12.25
North 8.0 -10.0 8.0 -9.75 8.75 - 10.0
South 8 -9.50 8.75 - 11.0 9.0 - 11.0
CBD 7.50 - 8.75 7.50 - 8.75
Cap Rate Ranges Used for 2018 Assessments
0
2
4
6
8
10
12
Rogers
Park
Lake View Hyde Park Jefferson Lake West North South
2018 Reassessment Cap Ranges CoStar Cap Rates
Source: Handwritten Cap Rate List From Berrios’ Office
signed by Tom Jaconetty (Chief Aide)

29. A Look At Equalized Assessed Values
 $700MM market value for
Willis Tower
 $392MM market value for
Prudential Plaza

30. But Are Loop Office Buildings Undertaxed?
CBD Class A Office Taxes PSF
% of Gross Rent

31. Growth of Chicago’s Property Tax Levy
$-
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
$1,400,000
$1,600,000
$1,800,000
2008 2011 2012 2013 2014 2017 2020
Note Redemption and Interest Bond Redemption and Interest PABF MEABF FABF LABF

32. Questions?