How much is too much Chicago development?

For anyone who follows real estate development and the issues it poses in Chicago, it can seem like world views always collide.

You’ve got the neighborhood groups and progressive politicians who look at the stark inequities in our neighborhoods and blame developers and city policies for lavishing attention on wealthy areas and leaving others to rot. They’d like to bring the private market to heel, forcing it to provide housing for the working class, and they want higher taxes on business success.

On the opposite side are the developers, asset managers, brokers and other consultants who understand that risky investments must offer the potential of higher rewards. They accept the need for government rules but chafe at restrictions, which they warn will kill off prosperity. This group will gladly take government money, however, to improve their odds.

Much of that view was on display last week at the annual forum of the Lincoln Park Builders of Chicago, an honorary society of those in real estate. The event included a panel of top developers discussing trends in the market. They were cautious about what they see.

It comes down to taxes and the city’s mandate that multifamily builders set aside a share of the units as affordable, either in their developments or off-site via a funding pledge. Tom Scott, CEO of CA Ventures, which builds student and senior housing and other projects around the country, said he listens closely to institutional investors. “Right now, Chicago is just not on their list,” he said.

“I think it’s the tax issue. And the way it’s been done over the years is a big problem,” Scott said, referring to property taxes and escalating public pension deficits. The panelists agreed that the worst thing about rising property taxes is the uncertainty behind how much they will go up. They fear the effect of new assessment practices intended to enhance fairness.

Scott Goodman, founder of Farpoint Development, and Sterling Bay Managing Principal Keating Crown talked about hard signs of an investment slowdown. Their argument is borne out by data from brokerage CBRE Group showing downtown Chicago office building sales fell from $5.9 billion in 2018 to $1.7 billion to date this year. A once torrid pace of residential construction also is easing.

But there’s another world view. Chicago has been No. 1 in corporate relocations for six straight years, according to Site Selection magazine. And the construction pipeline is still busy, with much activity focused in Fulton Market, epicenter of Chicago growth.

The Chicago Plan Commission endorsed two major projects for that area Thursday. One is a 16-story Standard Hotel at 1234 W. Randolph St., next to City Winery. At 259 rooms, it would be the largest hotel yet for Fulton Market. The other is an 11-story, 243-apartment building at 1440 W. Randolph St., overlooking Union Park.

I was struck by something in the presentation for the Standard Hotel. It included a rendered aerial view of the possible buildings to come around the property. It’s a high-rise thicket.

Residents have lately complained in louder voices about congestion and disappearing parking. The city has been alarmed enough to order a special study of Fulton Market infrastructure, perhaps late in the game. But it’s a reminder that we live with the consequences of development, which can be the product of decisions made years ago.

Mayor Lori Lightfoot has appointed a 20-member Inclusionary Housing Task Force as one way to deal with affordability. The panelists at the Lincoln Park forum complained the members include no developers. Not true. It includes representatives from for-profit firms such as Habitat and Magellan Development Group, bankers, brokers and nonprofit developers conversant in doing deals.

Sterling Bay’s Crown said his firm is looking to cities more hospitable to job creation, such as Dallas, where state and local governments have thrown $40 million at Uber to build a regional office.

“We don’t have a dollar in Chicago to give to attract these tenants, and that makes it tough,” he said.

But while Crown might not be getting taxpayer money to attract companies to his developments, he is getting big bucks to help build them.

Sterling Bay’s swanky Lincoln Yards project on the North Side stands to reap up to $1.3 billion in tax incentives. It’s an issue that’s riled up everyone from affordable-housing advocates to the Chicago Teachers Union to progressive aldermen on the City Council. Crown might want to choose his words more carefully next time.

Brininstool and Lynch

James Carpenter Design Associates