Is the West Loop market in a bubble?

What is it about the West Loop? I mean I know what it is, but it is truly amazing how so many people can have so much love for a small Chicago neighborhood. The city’s best restaurants, gorgeous historical loft-style architecture, and now some of the world’s best companies all within just a few square blocks. I get it. The West Loop is all around cool.

 It also has a very rags-to-riches Cinderella story history. Fifteen years ago, the West Loop had next to no residential housing and was the hub of the city’s meatpacking industry (thus all of the historical loft-style architecture!). Once the restaurants started flooding in, lots of Chicago’s food-loving folk started buying property and it pretty much snowballed from there. The growth has been intense for the West Loop, and I talk to people constantly about this tiny micro-market and what lays ahead.

I definitely know the West Loop market, but not like my good friend Christine Lutz, whom I met at Coldwell Banker years ago. Christine is a real estate expert, having worked in the industry for 30 years and closed $1.6 billion in sales all across the country. Christine currently works at On Collaborative, a full-service national development marketing and sales firm integrated with Coldwell Banker branded operations. Many of Christine’s developments have been in the West Loop, including 1400 W Monroe, which will deliver in 2020. I asked Christine to tell us about what is going on with the West Loop market now, and what she anticipates for the future:

Where are we with the West Loop market--the beginning, middle or end of a bubble?
The West Loop market has neutralized a bit from where it was a few years ago. Right now we are approaching the winter market with well over 20% additional inventory than what we had last year. Deals have also declined. As of the end of Q3, here are a few specific stats:

Active units: 124
Pending units: 37
Closed units in last 12 months: 330
Average days on market: 56

56 new construction projects:
Office: 25
Hotel: 7
Rental: 17
Condo: 7

The West Loop is very constrained area with bounds south of Lake, west of Halsted, east of Ogden and north of 290. Because it is such a small footprint, there is a finite amount of competition so as of now we don’t see a bubble for the West Loop.

What does the future look like for the West Loop market?
One of the biggest reasons there aren’t more deals happening in the West Loop has to do with zoning. Currently, the city has  a very high mark in place for affordable housing that new construction has to hit in order to be approved. Basically, if a new residential building is approved, a certain percent of the units must be devoted to affordable housing. The requirements are so high that many developers are unable to work in the area. The issue will get resolved, but as of now, zoning is a big deterrent to residential new construction in the West Loop.

 On the flip side, I also anticipate an additional flood of interest in the area given all of the new companies moving into office space. All of the suburban companies will have a good amount of employees looking for housing closer to the office. Right now, there isn’t enough new construction to keep up with that demand.

What advice should buyers keep in mind?
A few things. First, if you are looking for a deal, be prepared to do some work. Next, prepare to buy before you start shopping around because when you find the property you want, you will need to jump right away.

What advice should sellers keep in mind?
Buyers in this market are very picky, so if you want to sell your property, you must make the improvements that buyers want.

Thank you for your time, Christine! We appreciate it as always.