Federal Reserve Bank on the current recovery…the good and the bad.

Last week I attended an SIOR event that featured a speaker from Federal Reserve Bank of Chicago, here are my notes.


Recovery from 2009 has not been as strong as past recessions. Why?
1. Hesitant growth since 2009
2. Spike in financial stress. Tight lending principals. Now stress is low.
1. Fed has kept Fed Fund target rate close to zero. Fed raised rate 50 basis points in Dec 2015
2. Quantitative easing. Buying securities, fed holds over $4T.
1. Food below inflation
2. Energy (oil) price are low.
3. Long term unemployed (more than 6 months) is at its highest historical level, but it is going down. One example would be people who want to work full time only working part time.
4. Labor force participation is low, but getting better. One reason may be wages have not increased.
5. Broad based recovery. Auto and auto parts/components. Fed sees a 2.4% manufacturing increase in 2017.
6. Dollar has been increasing. Good for US consumer detrimental for exports/manufacturing.
1. Inflation is beginning to increase +\-2%.
2. Employment has been steady, but not growing too much.
3. IL. Unemployment is creeping up (bad).
4. Housing starts are increasing steadily over 1M per year.
5. Interest rates are staying low.

SIOR leaders discuss boutique commercial real estate firms

Boutiques Resilient in Face of M&As

By John Salustri | Globe Street

CHICAGO—The spate of multinational service providers gobbling up—or being gobbled up by—other multinational service providers leaves one to wonder what the smaller boutiques, the moms-and-pops of the industry, are thinking. Members of the Independent Brokers Group of the Society of Industrial and Office Realtors aren’t flinching.

Thornburgh: “There will always be a substantial place in the market for the highly skilled boutique and regional firms.”  It was an appropriate time to chat with the folks of SIOR (a GlobeSt.com Thought Leader), given that the association’s Fall World Conference is set to kick-off here on October 8. And while the consolidation trend does tip the scales of competition toward the big boys, there’s plenty to be gained from the boutiques.


“The larger firms can control the market, setting rental rates and term structure,” says Jason M. Crimmins, CCIM, SIOR, president of the Short Hills, NJ-based Blau & Berg Co. “But there are corporate users who recognize the value and local expertise that independent firms have to offer. As an independent, we bring not only our local proficiency but every other SIOR independent’s local expertise.”

That’s where the IBG comes in, he says. “The IBG has been crucial in uniting our firms, and helping us display our local market expertise while providing a global network of SIOR professionals.” In essence, he says, the IBG gives otherwise regionally restricted firms an unprecedented national reach.

Robert G. Thornburgh, SIOR, CCIM, CPM, president and CEO of Heger Industrial in Long Beach, CA, is equally philosophical about the rise of the M&A trend—and the strength of the independent broker in the face of that trend. “All businesses, large or small, are continually searching for efficiencies and developing ambitious growth plans,” he observes. “A vibrant company closely examines procedures; systems; and inevitably, its people.” As a result, he adds, there should be no surprise that consolidations are taking place. “It’s a natural part of this process.”


Crimmins: “Relationships can become a factor only when results are provided.” But that activity doesn’t change the role of “the skilled, independent niche operator. Consolidation and recent growth are certainly in part being fueled by larger corporate clients who are opting for the efficiency of a single provider,” says Thornburgh, who is director of SIOR’s Western region. “However, there will always be a substantial place in the market for the highly skilled boutique and regional firms that continually place a premium on relationships and delivering a higher level of service.”

Crimmins notes, however, that smaller firms still have to focus on the basics. “Relationships become a factor only when results are provided,” he says. “All clients ultimately focus on the bottom line. Given the proper platform to distinguish broker from broker, they would ultimately choose performance over relationships.” In the smaller firm he believes, clients are most likely to get both.

It’s the nature of the market that the mega-mergers will continue. It’s the nature of the smaller shops, to simply keep on keepin’ on, to keep their eye on that performance and those relationships. “As an independent boutique company,” says Crimmins, “all we can do is continue to make deals, develop stronger relationships with our clients and continue to get our name out there.”

Click here for link to Globe Street Article


Chicago Tribune reports the new Elgin-O’Hare Expressway may not feed into O’Hare

May 03, 2014|By Jon Hilkevitch and Richard Wronski, Tribune reporters

O’Hare western access may look like dead-end
With plans for a western airline terminal on hold, DuPage highway to airport planned to carry traffic to old entrance
Construction worker Shawn Ferrin of Midlothian cuts concrete storm sewer pipe along the eastbound lanes of the Elgin-O’Hare Expressway in Roselle on Tuesday, April 15, 2014. ImageThese expansions are part of the Elgin-O’Hare Western Access Project. The project will be completed in 2018.
(Stacey Wescott / Chicago Tribune)
Construction begins in earnest this year on a multibillion-dollar stretch of highway in DuPage County amid a growing sense that its potential to become a long-promised western route to O’Hare International Airport will fall far short of expectations.

Political and business leaders have envisioned a roadway, lined with retailers and other services, that takes passengers to a new western terminal at O’Hare.

But plans for the terminal never got off the ground, and on paper, the road system set to be built by 2025 will be a bypass that will still force air travelers who live west of the airport to circle around to the old eastern entrance.

The situation stems from a decade-old deal involving DuPage County, suburban mayors and the city of Chicago. The county and municipalities agreed to accept new runways and the noise that comes with them, and the city would persuade O’Hare’s biggest airlines to kick in millions of dollars to help build a western terminal that would make a future highway practical.

But while new runways are being built and so is the highway, the airlines are not on board with a new terminal, which might bring in competitors. And without the terminal, the highway appears to be, in effect, a road to nowhere.

It will dead-end at the airport’s western boundary, several miles from the nearest terminal. Those wanting to proceed to the airport will take another new road north or south to get to the old entrance. Or they might one day be able to use a park-and-ride system, featuring 35 to 40 minutes on a shuttle bus.

“No one is going to drive to the west side of O’Hare simply to park and take a bus,” said Elk Grove Village Mayor Craig Johnson, whose community has long supported a western access and bypass roads. “I am always hopeful that lightning strikes and they will build the western access terminal. But I am not going to hold my breath.”

As if that wasn’t frustrating enough for western suburbanites, the new roadways will carry a toll that’s more than three times higher than other area toll roads.

If you build it …

State lawmakers last June approved the long-planned $3.4 billion Elgin-O’Hare Western Access project. It will include an extended Elgin-O’Hare Expressway that intersects with a new north-south tollway skirting O’Hare’s western edge and connecting to the Jane Addams Memorial Tollway (Interstate 90) and the Tri-State Tollway (I-294).

Even though the Tollway is spending $3.1 billion on the project, there is a $300 million funding gap, which DuPage County and local communities will have to provide. The county has secured about $110 million in funding so far, DuPage County Board Chairman Dan Cronin said.

Proponents of the project see underused land stretching east from the western suburbs being transformed into gas stations, restaurants, hotels and shopping centers employing tens of thousands of people.

They point to predictions from an advisory council appointed by Gov. Pat Quinn that say the project will create 13,450 jobs during construction and that future development will lead to 65,000 new jobs by 2040.

“There are 127 square miles of untapped opportunity out there that brokers and developers are excited about,” said Greg Bedalov, president and CEO of Choose DuPage, which markets DuPage County and supports economic development.

“Absent a western access road and absent the needed infrastructure, that day will never come,” he said.

But Bedalov said recent developments are important for a roadway project that “has been baking for some time.”

“Some people say to me, ‘Greg, come on, you are building a road to nowhere.’ But I disagree. Transportation infrastructure is in the team photo of the first three things that developerslook at,” Bedalov said.

Cronin said he supports the idea of western access to a new terminal, but said that day won’t come until an improving economy generates hundreds of additional daily flights at O’Hare, and added that he’s taking heat from constituents in the meantime.

“There are a lot of people, particularly in my neighborhood, who are like, ‘Cronin, what are we signing onto this thing for? Why do you support the toll increase? We don’t even have a commitment that they are going to open up (the road into the airport),’ ” he said.

Cronin said he shares the frustration, but he insists the commitment will be made. “We might be gray, but it will happen,” he predicted.

But for now, the closest thing to true “western access” to O’Hare, when all is said and done with the project, will be a $17 million, fishhook-shaped ramp off York Road, which will dead-end on O’Hare property.

The Tollway agreed to pay for the ramp even though it was not directly connected to the new tollways because it was favored by DuPage County and the local communities, Tollway spokesman Dan Rozek said.

“The Tollway frequently works with local communities to make improvements on existing, adjacent roadways while building or improving interchanges to improve traffic flow,” Rozek said.


Western terminal

The city-suburban deal a decade ago that was to help make a new terminal possible rested on the idea that the former administration of Mayor Richard M. Daley could persuade the biggest commercial carriers at O’Hare, United Airlines and American Airlines, to investmillions annually to pay for their share of the new western terminal campus. It would house more than 50 airplane gates and provide parking facilities for passengers on empty land along the west side of the airport.

But the airlines, which have welcomed new runways to ease flight delays and increase O’Hare capacity, never bought into the city’s plan for terminal expansion, which likely would entice other airlines to compete against the two mega-carriers.

Executives at Chicago-based United and at American have consistently said that two new runways that opened in 2008 and 2013 plus a runway scheduled to debut next year, along with other airfield improvements, are adequate to meet the two carriers’ needs for the foreseeable future.

The airline officials said any future investments will be based strictly on demand and cost efficiencies, not the city’s desire to complete the airfield expansion project, which under the most recent projection released by Chicago aviation officials is estimated to cost $9.7 billion in 2012 dollars.

Asked about the idea of a western terminal, one airline official who spoke on condition of anonymity said: “We don’t have a dog in that fight. Who’s going to use the western terminal, anyway? Not us. We have no interest in it.”

And the park-and-ride idea, which in the O’Hare expansion master plan has pointed to a possible extension of either the airport’s people mover transit system or the CTA Blue Line, has been scaled back to a shuttle bus that’s 35 to 40 minutes from the main O’Hare terminals.

For their part, Chicago officials said they are moving to complete O’Hare expansion.

“Our top priorities are to continue progress on the … airfield projects and to continue to coordinate with the state on western access to the airport,” said Karen Pride, spokeswoman for the Chicago Department of Aviation. “As we’ve said, the western terminal is a demand-driven project.”

The aviation department conducted a study in 2010 that developed several alternatives for the western terminal to possibly serve domestic and international flights as well as provide passenger connections to the main terminal core.

The main purpose of the study was to “ensure that developments on the west side of O’Hare, including the proposed Elgin-O’Hare west bypass, can co-exist,” Pride said.

Quinn’s executive director at the Tollway, Kristi Lafleur, acknowledged there is no assurance of any development on O’Hare’s western edge, but she says the $3.4 billion project around O’Hare represents “an interim step” that would facilitate any future airport expansion.

“We’re not sure Chicago or the Department of Aviation is committed to a western terminal,” Lafleur said.

Johnson said that for years Chicago Aviation Commissioner Rosemarie Andolino told him and other mayors who were part of the Elgin-O’Hare West Bypass Advisory Council that “Chicago has no intention in the foreseeable future, if not our lifetime, of building the western access terminal.”

“Rosie admitted, because of airline resistance, that they only plan a parking lot with a bus ride to the existing terminals on the east side of O’Hare,” Johnson said. “That’s always been Chicago’s intention. They have never had a history of being good neighbors with the surrounding towns.”

He speculated that a likely scenario would be for Chicago to use some of the vacant airport land to build hotels and restaurants and maybe even an entertainment complex — the same type of projects that officials in DuPage are pushing on the land outside the airport.

“That would be bad for us because it takes away potential business from our communities,” Johnson said.

Andolino did not respond to interview requests by the Tribune.

High priced tolls

Tolls along the Illinois Tollway will cover the lion’s share of the $3.4 billion project, which was part of the reason toll costs systemwide nearly doubled in 2012. But estimates suggest motorists who use the new roads will pay a premium, roughly 20 cents per mile for passenger cars versus the current 6-cents-a-mile average.

That’s the price motorists face for still having to circle the airport and enter from the east, via I-190, and onto the chronically traffic-clogged circular roadway that sits in front of the three domestic airline terminals.



Twitter @jhilkevitch

Twitter @richwronski