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Will looting fears depress Chicago’s real estate market?

by Meg White

Will looting fears depress Chicago’s real estate market?

Last Friday, four Chicago aldermen called an emergency meeting to consider a number of items related to recent violence and civil unrest in the city. Among them was a resolution submitted by 15th ward Ald. Raymond Lopez requesting that the City Council “call on the governor of Illinois to mobilize the National Guard to augment and assist the Chicago Police Department … for a duration no less than four months.”

Interestingly, Lopez specifically called out real estate as an affected sector. “The continued attacks against Chicago’s collective safety will impact our residential real estate, current and future investments in our communities, and our city’s future economic development,” the resolution read.

While the proposal didn’t go very far, having been relegated to the council’s committee on public safety, it underscores the notion that many Chicagoans are still quite tense over public safety issues. To get an idea of how much of real estate’s future is indeed wrapped up in the debates around the city’s current security woes, we spoke with a number of real estate professionals who represent communities that have been heavily impacted by recent events.

Unrest manifesting in the market

A longtime top producer focusing on the downtown market, Americorp Real Estate team leader Matt Laricy has been watching the multiple listing system for clues about how the situation is impacting the market, and said the numbers indicate a large drop in buyers and increase in sellers. After the second round of riots, Laricy said he went from doing 50 to 60 showings a day to none. While it’s picked up a bit since then, he noted on the day that he spoke with Chicago Agent last week that there were around 115 new listings up for the River North area alone, whereas there might have been as few as four on average this spring, at the start of the COVID-19 pandemic. “How many people are not going to buy in Chicago, or never want to be in Chicago again, because of that?” he asked. “What type of effect is this going to have?”

Alongside this data, Laricy is seeing canceled deals, hearing many would-be buyers decide to shift their home searches to the suburbs, and getting inquiries from owners who are eager to sell their stakes in the city. Marla Forbes, an @properties agent who lives and works in the Gold Coast, echoed Laricy’s view on the market, but predicted more of a pause than a pullback. “Sales volume is down; you can look at the stats and there’s no question about that,” she said. “At this point, I don’t think it’s enough to drive people completely away.”

Different neighborhoods have had different reactions to the events of the summer, however. Kim Offord, managing broker and district director of Fathom Realty in the South Side neighborhood of Chatham, said despite the unrest, she’s still seeing a lot of people who want to buy and not hearing from homeowners who want to get out of Chicago just yet. “I’m seeing quite the opposite,” she said. “In the midst of COVID and civil unrest, we are still seeing a bunch of buyers. … A lot of people are saying, ‘This is where I live. I’m not going to let this discourage me.’”

Corcoran Urban Real Estate broker Matt Silver also doesn’t believe Chicagoans will decamp for the long-term. While he had several buyer clients who were looking in the city decide to move their searches to the suburbs, he noted that he’s seen the opposite trend as well. “My suburban sellers couldn’t wait to get back to the city,” he said, noting that the isolation felt in the COVID-19 lockdown was even more pronounced in the suburbs. He added that clients who fled the city to second homes this spring, thinking the move would be permanent, are now calling him to say they’ve reconsidered.

What’s next for the city?

Laricy said he’s most concerned about what will happen if another rash of looting or violence hits downtown this summer. “If you push things too far, it can go to a certain point where it can’t be saved,” he said. “If you have something happen like that again, I don’t think Chicago can come back.”

Forbes agreed that such a repeat could be dire for downtown Chicago’s prospects but was optimistic about the future overall. “Right now, if we can get to a point of equilibrium [where] we can say, ‘We hear you’ with the protests, we can manage our way out of the situation,” she said, adding that many of the people moving to the suburbs were likely planning on heading that way in the near future and just moved up their timetables.

Forbes added that it’s important to keep current events in perspective. “Yes, this is a blip on the screen, but we are going to get past this. This is not the first time this has happened,” she said, recalling the fear and uncertainty she felt when riots rocked urban areas in the 1960s and 1970s. “One thing that we can do is reassure our clients, whether they’re buyers or sellers, that cities are resilient.”

While he’s hoping it won’t happen, Silver doesn’t think the reaction to looting would be the same a third time around. “There’s been enough of an outcry,” Silver said, specifically noting the letter from Sudler Property Management putting the administration on notice. “I think the response from the police department and Mayor Lightfoot is going to be significantly different than it was last time. … If there is another looting situation, the response is going to be pretty swift and pretty drastic.”

Commercial sector woes

The one-two punch of the coronavirus pandemic shutting large swaths of activity down, combined with the financial toll of looting and cleanup have hit the city center particularly hard. While Chicago is often called a “city of neighborhoods,” Laricy noted that the overall strength of the municipality lies downtown, and with the commercial sector. While a wave of business closures will make The Loop less attractive as a place to live, he also worries businesses that try to use insurance money to repair their storefronts and reopen will face rising premiums that might push them away from downtown in the coming years.

To those worried that these compound effects could cause Chicago to fall into a long-term depression like what happened to our neighbors in the Motor City, Silver is skeptical. “No matter what happens, we will never be Detroit,” he said, citing the diversity of local industry. However, he did note there could be some big changes in the retail landscape in the near future. “It would not shock me if some of the larger big box stores left their locations,” he said. But he said those moves are more likely based on the long-term pressures impacting the sector from online retailers, rather than fears of further unrest.

The concern that some businesses might use looting as an excuse to disinvest from poorer communities is a real one on the South Side, Offord said. But she’s been heartened by the response from corporations after community leaders called out banks that threatened to not reopen their branches. “That caused a strain on the community,” she said, though she feels the neighborhood’s overall message of “We’re moving forward and we’re expecting you to do the same” was heard by most business owners.

Regardless of location, some stores were hit twice by looting, and some businesses will not return. But Offord said the vacuum has made room for burgeoning entrepreneurs, particularly in the food production and delivery sectors. “A lot of the communities on the South Side are food deserts,” she said. “The looting and COVID and everything that has happened has really inspired a lot of community togetherness and a lot of hope.”

What the city can do

Forbes noted that she’d witnessed a clear increase in police presence in her neighborhood after the second round of widespread looting. Still, she added that that fact is much more comforting to Gold Coast residents than it is in neighborhoods where police presence has resulted in less positive outcomes. “They’ve undoubtedly stepped up the police presence in the area. … That gives people a sense of security, but I think that’s just part of the solution,” she said. “I’m not sure that sentiment is shared in other neighborhoods, and that’s part of the problem right there.”

When asked what needs to change, Offord’s focus was longer term. She said she’s excited about the mayor’s INVEST South/West program, which seeks to build up 10 neighborhoods on the city’s South and West Sides with small business support and infrastructure upgrades. “If we had had that type of interest and investment in these communities years ago, we would be in a better situation,” she said. “It is targeting really all of the areas that were hit the worst” by the unrest.

Silver agreed that none of the root problems causing this unrest will be resolved until the city tackles the uneven distribution of resources, from transportation to commercial investment. “I want everyone to win. We live in a big city, and it’s ridiculous that we’re so segregated,” he said.

Getting involved in community

None of the brokers we spoke to for this story are content to wait for officials to solve all the problems facing the city. “We have a duty to band together,” Laricy said. “There’s a lot of positives in the city. … How can agents help out with that?”

One newer vehicle for broker involvement is The Chicago Association of Realtors’ recently launched diversity committee known as The 77, which aims to assign a member liaison to each of the city’s neighborhoods to ensure it is serving all areas. In response to the first wave of looting, the group swiftly created an initiative to help fund repairs and organize cleanup efforts.

While the donations were helpful, Silver noted that the real strength of the group was its ability to mobilize volunteers. He said that as soon as a member posts that a block needs help on the Facebook group, it’s a matter of an hour or two before dozens of volunteers show up to help. As a representative of Lakeview at The 77, Silver said being able tell his alderman, “I can mobilize 50 to 100 people in an hour” is powerful.

Offord, who represents Chatham on the committee, noted that The 77 came about at just the right moment. “It allows us to be right there and have our ears open and our eyes open to what is going on in the community,” she said. “The easiest thing to do is just be present — instead of just putting a sign down in front of a house and driving away, actually taking the time to talk to the neighbors.”

Considering the industry’s checkered past when it comes to fair housing, Forbes, who represents the Near North Side on the committee, said it’s especially important that real estate stand up at this critical moment. “Realtors unfortunately played a large part in creating the problems we have in this city in terms of segregation,” she said. “There’s a certain level of responsibility incumbent upon Realtors and banks to try to correct some of these ills through open and honest dialogues.”

While Silver said there are no quick fixes when it comes to systemic racism and decades of neglect, the Realtor community is going to be around for the long haul to help makes things right. “Unfortunately, it will probably take generations to eradicate this nonsense,” he said. “We can actually make a difference in our communities. … The bulk of people may be hunkered down, but people love this city.”

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Comments

  • Brian Ploszay says:

    The second round of looting was very damaging. It will hurt tourism, investment and some residents will leave. My gut feeling is that most of Chicago be fine in the long run. The City actually is getting better in its response.

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