Cook County Assessor Kaegi downplays downtown commercial property’s financial issues
2024 is a triennial reassessment year for all properties located in Chicago. As a result of this reassessment, all properties located in Chicago will be revalued and reassessed in 2024. Already, the 2024 assessments for properties located in Rogers Park Township have issued and the assessments for West Chicago Township will issue in late May with the other six city townships’ assessments issuing later this spring or summer for properties located in Lake, Lakeview, Hyde Park, Jefferson, North Chicago and South Chicago Townships.
The downturn in the commercial real estate market in general and office buildings in particular have struggled economically during the COVID-19 pandemic with high vacancy rates as offices closed entirely or re-located and also due to employer’s acceptance of fully or hybrid remote working schedules for their employees. However, Cook County Assessor Fritz Kaegi has publicly stated in an interview with Crain’s Chicago Business and directly to local property owners that overall public sentiment about the declining property values in Chicago’s urban center, and its impact over the past couple of years is perceived by the public to be worse than the Cook County Assessor’s Office believes it actually is.
To contrast the Assessor’s belief that things just aren’t that bad are the following facts: 1) Downtown office vacancy in the most recent quarter grew to above 25% for the first time ever and, 2) Loop retail vacancy rates hit a record high of 30%. Recently, Chicago-based Honore Properties paid $4.8 million in early May for a seven-story building located at 118 S. Clinton Street, Chicago . Honore purchased this approximately 72,000 sq. ft. office property from ASB Real Estate Investments which acquired the property in 2019 for $14 million or a 65+% decline in market value. Honore plans to convert this boutique office building into more than 70 apartments.
Kaegi’s response to seeing commercial sales at reduced purchase prices than what they were purchased for as recently as in the years preceding the pandemic, is that mid and lower tier buildings (Class B and Class C properties) have declined 20%-40% from the prior 2021 triennial assessment period, but that Class A and trophy buildings’ demand is still strong as companies look for space to attract and encourage employees to come back to the office.
Overall, there appears to be a disconnect by Cook County Assessor Kaegi that downtown commercial real estate, and in particular, the Loop’s office building market is better than it appears to be. More people in the real estate industry who are involved in lease negotiations, brokering and development, believe that the market will continue to struggle and are currently suffers financially from lower occupancy rates due to employee resistance in returning to work. In turn, businesses and firms will continue to reduce their office space footprint or choose not renew their leases which will cause the plummeting market values of Chicago’s commercial properties to continue for the foreseeable future.
