Illinois Commercial Real Estate Market Trends Analysis

Commercial properties that contain a business that deals with other businesses (B2B companies) are considered industrial properties. These businesses may in reality make the goods, or they might be intermediaries that deliver a manufacturer’s goods to other companies.

Lately an additional type of industrial tenants has been created by fulfillment centers that deliver online orders to retail clients.

Industrial properties are long-term portfolio investments that are wanted by investors/landlords. Their return projections include rental income and asset appreciation. Rental agreements can be either gross or net.

Annual and 10 Year Population Growth

Industrial real estate investors have a need for accurate population data that is particular to their category of property investment. A declining populace has a more indirect effect on industrial properties by way of a declining tax base. Adequate tax receipts are required to keep up highways and infrastructure that industrial properties require.

All property values, commercial and residential, are impaired in markets that are losing citizens. Industrial renters are ongoing businesses that have to have workers. The best industrial tenants will not move to a market that is losing possible workers.

Property Tax Rates

As we witnessed with apartment complex investments, tax rates are a reliable clue to the financial viability of a potential market. Stable tax rates are an indicator of a foreseeable market for your investments.

Our blog contains informative guides on industrial and commercial property taxation as well as commercial property tax reduction methods to help you get informed about taxes more deeply.

Accessibility

Industrial building renters usually ship large quantities of goods or unwieldy items. Large tractor-trailer trucks are utilized to ship these products. Industrial property investors search for assets that are adjacent to significant highways that large tractor-trailer trucks can access easily.

There are industrial companies that use trains or airplanes to haul their goods. Industrial properties that are placed near an interstate make this more convenient, which makes the property more valuable.

Utilities

Companies that make goods themselves require significant amounts of water and electricity. If a property does not contain suitable amounts of these utilities, some companies will look elsewhere.

Businesses that are housed in retail units sell directly to the population in the area. These stores might be in a building alone (single-tenant) or in a structure with other renters (multi-tenant). Recruited tenants for single-tenant assets are drug stores, automobile parts stores, banks, and dining establishments.

A multi-tenant property could be as small as a few units, somewhat bigger “neighborhood” or “strip” shopping centers, or larger centers that are anchored by nationally known brands including grocery stores. Shopping centers that include condominiums or apartments, office space, and retail shops are known as “lifestyle” shopping centers.

Retail leases are “net” with renters being responsible for the landlord’s tax, property insurance, and maintenance of common areas as additional rent. Tenants are responsible for the maintenance of the property as well.

A retail investor will employ the identical demographic data that their desired tenants use to locate a satisfactory investment asset.

Population Growth

The total data for the area under consideration isn’t enough for retail investors. The vital information will relate to the immediate trade area around the possible investment asset. Retail sites need to be visible and accessible to their customers as they go about their lives.

Population growth is relevant, but retailers require a minimal amount of clients at this time. Retail property investors need to see the existing population growth, average annual population growth, 10 year population growth, and daytime population.

Median Income

Nationally known stores or “credit tenants” have very particular site requirements that involve wage amounts. Median income data is a guide to the customers who can buy costly goods from luxury stores or people on a tighter budget who require lower prices.

Median Age

The age of the market’s populace could be critical to companies who rent your property. Depending on the kind of center (grocery anchored, entertainment anchored, big box retailers) the age of the populace can help draw desired retail lessees.

Property Tax Rates

Tax rate information is assessed by retail investors for similar reasons as residential and industrial property buyers. Rising taxes are passed on to their renters which decreases their occupancy rates, and the worth of their asset could be reduced down the road.

Having your real estate overassessed by the county is a common problem leading even to more losses. If it is, the best commercial real estate attorneys in Illinois will advise on how to protest the wrong estimate.

Office buildings lease work space to businesses. Office space might be big enough for a single worker or tens of workers. For many significant businesses, leasing office space enables them to use their capital for the development of their business.

Office tenants sign a “full service” lease agreement which is also categorized as a gross lease agreement. All of the owner’s costs are included when the rent amount is calculated. This arrangement may be tailored to meet the needs of the landlord and the renter.

These investors are long term investors who project revenues from rental income and the appreciation of the asset.

Population

The specific demographic data that office property owners employ illustrates the number of desired office employees in the population. This consists of the populace’s size, age, and education level. It’s vital for investors to understand what their potential renters want and to assess the region accordingly.

Property Tax Rates

A properly managed city or county that draws possible office workers to the area will not have excessive or consistently rising tax rates. Strong renters will look for that kind of community.

Incomes/Cost of Living

Income levels tell a prospective renter whether employees in the area are appropriately qualified for their positions. The data also helps the tenants estimate labor costs.

Education

Education achievements are analyzed by office lessees and investors to a greater degree than other real estate investors. Some lessees don’t have to find college degrees but other businesses do.

Buy, rehab, rent, refinance, and repeat (BRRRR) is an investment method that builds a portfolio of rental properties. These are long-term or Buy and Hold investments. This strategy has the benefit of providing short-term (rental) revenue and net income from the long-term growth in worth.

Once the property is purchased and rehabbed, it is leased to a tenant. As soon as they are able, the investor receives a “cash-out” refinance that enables them to take equity out of the property in cash. This becomes the down payment on their subsequent property, and they repeat it all again.

Traditional commercial financing products aren’t issued for buy and repair deals. Such projects carry a high risk for conventional financing firms.

Search through our directory of commercial real estate vendors to choose the top commercial rehab lending companies in Illinois and the top Illinois commercial private and hard money lending companies.

In this directory, you will also see the top commercial and industrial real estate agents in Illinois whose local knowledge can be valuable for your success. They will be happy to educate you about the important local real estate trends described in the next section.

Median Gross Rents

This data tells investors whether they could reach their primary and future revenue goals. This can affect decisions about where to invest and which assets to acquire.

Property Value Growth

Buy and hold investments obviously need assets that are likely to grow in worth.

Population

The rate of the population’s increase is a significant number to BRRRR investors. Anemic housing markets that they need to avoid will demonstrate stagnant or declining rates.

Income

To buy the right investment property, investors must be aware of their desired audience’s amount of income. If you are satisfied owning mid-priced properties, you do not need to find high wages.

Property Tax Rates

Growing taxes will cut into your profit. On the contrary, stable tax rates can indicate an expanding area.

Moreover, in the local tax office’s register, your asset can be overestimated, which means you overpay property taxes. The best Illinois commercial real estate appraisers along with the best commercial property tax consulting companies in Illinois are used by wise investors to reduce your taxes.

The industry understanding of development typically means complete residential communities or commercial ventures of just about every size. The developer has to find land that falls under their criteria so that they can prepare residential parcels for sale or commercial rental properties.

This requires acceptable zoning, land use plans by civil engineers, construction plans for buildings, and approval by the local municipality. When all the plans are authorized, the site work and construction are completed and purchasers or renters are found.

It can take one or two years from the start to completion of a development project. The economy or local regulations can change in a negative way before the venture is finished. For this reason, development is the most speculative category of real estate investment.

Risks may force a development company to stop the process for an undefined term. During this time, the site can be damaged by criminals, natural disasters, or other things. The best commercial property insurance companies in Illinois help local builders avoid losses resulting from such events.

Insurance must be included in the project costs for submitting it to a lender. The best commercial construction real estate lending companies in Illinois could give you a list of insurers they deem worthy.

Population

To make certain that their residential and commercial development projects are located in suitable areas, developers look at the same populace size, population growth, household incomes, and education achievements of the populace that their end users need to have.

Income

Retail property developers assess salary data to locate their project where it could draw the buyers that their intended tenants require. High-end retailers search for higher income areas, whereas lower priced retailers need middle class customers.

Statistics on incomes can help industrial and office renters know what they’ll have to pay their labor pool in that place. Income levels help developers determine whether a market is good for industrial or office properties.

Education

Companies that occupy space in industrial and office properties have specific education statistics in mind for their sites’ populace. White collar companies want to find a majority of college graduates. Industrial employees do not want any more than high school grads.

Age

Developers search for a median age that shows citizens who are active workers and taxpayers. These are the employees that office and industrial tenants need to have. Involved employees and their households shop at stores and dining establishments that rent retail real estate.

A working age population additionally has the most active residential buyers that residential investors need.

Investing in loan notes includes paying less than the payoff balance for a loan that’s in place so that the note buyer turns into the lender. Lenders may sell loans to increase cash, but they normally liquidate them due to them not being paid as promised.

Some promissory note buyers will renegotiate the loan to enable the borrower to continue their loan payments — for a long-term investment. If the borrower defaults, the investor has all the foreclosure rights of the previous lender and can foreclose to repay their invested amount.

Population

One of the most fundamental factors in real estate investing of all kinds is the magnitude of the market’s population and if it is increasing. This is an immediate “sniff test” of the financial strength of the area.

Property Values

Property market worth growth rates are significant to the promissory note investment plan. The viability of the property is the strength of the investment.

Property Tax Rates

If property taxes escalate consistently, borrowers who have problems paying their mortgage payments will find it troublesome to stay current. This would be unacceptable for interest income, but is in fact accepted by note buyers who hope to make a profit quicker by repossessing the property.

Real estate investment trusts (normally called REITs) are investment entities that invest in and oversee revenue producing real properties. Rent receipts and occasional asset sales create the REIT’s income.

REITs are required to distribute 90% of their profits in dividends which appeals to a lot of investors. Modest investors like REITs because they can liquidate their shares anytime.

REIT shareholders are called passive investors which means that they have no activity in the acquisition or oversight of any assets.

Investors, who want to move away from active investing but choose to stay in real estate, look into buying REITs. Once you sell real property, you can use the money to buy REITs.

There exists a wonderful legal tool enabling you to postpone paying Capital Gains Tax on property sale in this situation. Our guides — Can You Do a 1031 Exchange into a REIT? and Pros and Cons of a 1031 Exchange into DST — will enable you to discover the benefits and rules of this procedure.

IRS requires that you seek assistance from a 1031 Exchange Qualified Intermediary to consider the transaction licit. Talk to some of the best 1031 exchange companies in Illinois offering this service.

An additional investment vehicle that gathers funds from people to invest in real estate is a real estate investment fund. It’s an organization that invests in other real estate-connected organizations, for example REITs.

This investment vehicle does not pay dividend revenue to their shareholders. The individual’s return is created by the valuation of the fund’s stock.

An investment fund might be a mutual fund, a private equity fund for high net worth investors, or exchange-traded funds (ETFs). Shares in real estate funds are bought and unloaded on the open market which is convenient for beginner investors.

Because they are passive investors, fund shareholders aren’t involved in any choices such as property acquisitions.