Stream Chicago Managing Director Phil Geiger recently participated in Bisnow Chicago’s Office Summit panel on October 19th, discussing where the Chicagoland office market stands and how it compares to nationwide trends.
One of the key themes of the Bisnow Office Summit was the effect of loan maturity, and how the opportunity to invest is coming. 25.5M SF of Class B Chicago office space will be maturing by 2026 – the most in the Midwest and the third most in the nation, according to a CommercialEdge market report. “Lenders aren’t going to want these buildings on their books, and they’re going to want to sell them at a massive discount,” Stream Managing Director Phil Geiger said at the Bisnow event. “There’s going to be a lot of people making a lot of money on these buildings in five to seven years.”
When an owner defaults on their loan, the building goes back to the lender, however, lenders are not asset managers and do not want to take on the burden of managing office assets so they will be actively looking to sell, likely at below the building’s value and sometimes even below the value of the loan.
Added Geiger, “A new buyer that comes in at a discount has the opportunity to reset the building’s basis and pump in additional capital via renovations/spec suites to attract new tenancy, increasing the building’s value.”
According to Geiger, there will need to be a few more office assets sold before it can be determined where the bottom is. There’s still a lot unknown around building values, which he thinks will start to become clearer in the next 18–24 months. As tenants evaluate their lease(s) and understand the value their tenancy has on the building, it’s critical to keep in mind the opportunities that are available to them.