Illinois', that is, Chicago's, commercial real estate markets are all a bit sluggish, but seem to be recovering slowly from a several year slump. There is some concern that a heavy tax burden will prevent a full recovery or, even worse, put Chicago at disadvantage as compared to other comparable cities such as New York, Los Angeles, Boston, Atlanta and Dallas. For the past ten years, Chicago has averaged almost $7 in taxes per square foot. By comparison, property taxes in New York are a little over $5 per square foot, and in Los Angeles they are a mere $2 per square foot. Further, operating costs are higher than those in New York, Dallas or Atlanta. Experts worry that funds that could be used to improve Chicago's commercial properties and lure tenants is being wasted on operating costs, including taxes.


The Chicago office market is still hurting, but slowing improving as it inches toward the 10% vacancy mark. Currently, vacancy rates hover at around 12% to 13%, the lowest they've been in several quarters. There's little to no new office construction in the city's downtown business district, which is helping the city absorb the current office inventory. For several straight quarters, the Loop has seen positive net absorption. In a bright spot though, the Central Loop, which had been bleeding tenants to the West Loop, has seen the largest drop in vacancy, though it still hovers at around 13% to 14% vacancy. The office market across the Chicagoland area is slowly and steadily improving, but it lags the downtown slightly, with vacancy rates around 14% to 15%. Overall, the suburban market activity is driven by renewals and small-scale expansion, and shows positive net absorption.

Once an industrial city, Chicago's industrial market continues to decline as it gives way to residential, retail and office uses. Unlike some other cities, Chicago's industrial space isn't being repurposed for flex or light industrial use. The market lags as industrial property that would normally be converted into residential or retail space goes empty on account of stiff competition from the suburbs and other sectors of the office market.

The housing market across Illinois has improved as the year progresses but is still weaker than it was in 2006. Prices are flat and the frenzied gobbling of farmland for new residential construction has ceased. Indeed, if an investor has the time to sit on his money, planned communities and housing developments sit half-built waiting for buyers with the time and resources to ride out the residential slowdown.