Huntington National Bank’s John Augustine identifies biggest Chicago commercial real estate trends to watch in 2022
January 6th will be an important day for REjournals as we celebrate the 20th anniversary of the annual Forecast Chicago Summit. On this special occasion, John Augustine, Huntington National Bank’s Chief Investment Officer, will be the keynote speaker.
The purpose of Forecast Chicago is to take a look into the future of what to expect in the next year. So we caught up with John to briefly discuss some of the key issues and trends in the commercial real estate space. But to learn more, click here to sign up for Forecast Chicago to hear John and 40+ other industry leaders touch on key ideas, highlight 2021 victories, and make predictions for the next year.
Johannes Augustin
The five biggest trends in 2022 …
There are five areas that we are looking at. One of them is employment trends, and we’re doing well in Chicago. And what about the office occupancy? This is something new. So we followed this just before the pandemic, but now it looks like we’re a bit of a hostage on the path of the virus again. Third, let’s look at home prices in general. Turning to our market, if we follow the Case-Shiller House Price Index, it shows that our house prices are up 11%. We have rising employment and low interest rates, which should signal further movement in the real estate market over the next year.
The fourth is the most difficult, but it is a little more subjective: the attractiveness of the business. When we look back on this year we find that we are once again the top moving city in the country, but we need to maintain and rebuild that momentum. And number five is the cost; especially for commercial real estate. Our costs per square meter are generally lower than on the coast, we’re the third largest market in the country and that’s good news. We still have a cost advantage.
The subject of “The Fall of the Great American Cities” was exaggerated …
That book is still in the first chapter on how businesses will operate on the other side of the great lockdown and pandemic. And we have one of the most diverse cities in the country to benefit from changing tastes and changing geographies. So this is still being written.
We know it’s frustrating for a lot of real estate developers because everyone is sitting a bit on their hands. First off, to see the trend of work from home and office occupancy and how they go back and forth each week. But still we’re off in the first inning, and that’s more or less the idea stage. Companies are looking for ideas. Individuals look for ideas. Those who work together and have the best idea as it connects companies with individuals will have a lot to do in the next five years.
Flexibility as a broader topic in commercial real estate …
Everyone has to be flexible in terms of working hours because we are experiencing a huge “replacement phase” in which everyone replaces the person with a machine because they cannot find the person at the moment. But generally speaking, we have the breadth and depth to weather incoming storms such as new varieties of the virus. We also have the latitude to take advantage of the business type and activity on the other side. We got off to a very successful start and brought new companies to our region, and there is no reason to lose this success.
Our other positive impression is that industrial real estate has been the most moved in the public real estate markets this year and we are the king in this area. We are the king of storage areas and the king of transport and logistics areas, whether railroad or truck. So there are reasons to be positive, but understanding that may require a new level of flexibility that we’ve never had to have before – just because the business models for the other side are still being written.