A Unique Opportunity in the Windy City

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Apple pledges to spend $500B in U.S. over next four years link

• Apple will invest more than $500 billion in the U.S., marking its largest-ever domestic commitment. The plan includes a new manufacturing facility in Houston, doubling its Advanced Manufacturing Fund to $10 billion, and expanding R&D investments.

• The company will create an academy in Michigan to train future U.S. manufacturers. This move aligns with Apple’s strategy to strengthen domestic production and innovation.

• Apple plans to hire 20,000 new employees over the next four years as part of its expansion. The investment reflects confidence in American manufacturing and advanced technology development.

Private investors dominating office activity since 2020

• Private buyers, including developers and high-net-worth individuals, have significantly increased their share of office transactions. Since 2020, private-to-private deals made up 26% of total volume, nearly doubling from 14% in 2003-2019.

• Institutional investors have pulled back sharply from office sales, now accounting for just 8% of total transactions. This is about half their previous market share before 2020, reflecting a shift in risk tolerance.

• The decline of institutional buyers is partly due to their aversion to riskier office assets. Meanwhile, private investors with operational expertise are better positioned to upgrade and reposition properties in a struggling office market.

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Office to apartment conversions seeing record-breaking numbers link

• The number of apartment units converted from office spaces has surged from 23,100 in 2022 to 70,700 in 2025. This marks a record high as adaptive reuse gains momentum.

• Office conversions now account for nearly 42% of all future adaptive reuse apartment projects. This shift reflects growing demand for urban housing and changing work trends.

• More recent office buildings from the 1990s to 2010s are now being repurposed at a higher rate. Feasibility, construction costs, and local incentives play a key role in project execution.

Industrial leads as net-lease investment volume spikes 13% in 2024 link

• U.S. net-lease investment jumped 13% in 2024, reaching $43.7 billion, with a particularly strong fourth quarter. Industrial & logistics dominated, increasing its share of net-lease investment to 64% in Q4 from 54% a year earlier.

• Industrial investment volume surged 87% year-over-year, reflecting investor confidence in the sector’s stability and returns. Retail and industrial are expected to maintain momentum as investors seek low-risk opportunities in early 2025.

• The average cap rate rose by 9 basis points quarter-over-quarter and 56 bps year-over-year to 6.8% in Q4 2024. A notable transaction was a FedEx facility in Portland, OR, which sold for $32 million.

Oregon Giving 0% Interest Loans for New Affordable Home Construction link

• Oregon is launching a $75 million loan program to fund middle-income housing construction with zero-interest loans for developers. The state needs 29,500 new housing units annually to meet the expected population growth, but current construction rates are falling short.

• The program allows cities and counties to receive no-interest loans and distribute grants to developers who build housing for those earning up to 120% of the area median income. Developers will also get a 10-year property tax exemption, replacing tax payments with fixed program fees.

• Oregon Housing and Community Services expects to fund 2,000 to 3,000 homes with this initiative. The program is modeled after similar efforts in New York, where a revolving loan fund was introduced to fill financing gaps for mixed-income rental developments.

Are Investors Actually Buying Up All the Homes? link

• Small investors make up around 18% of the market, while mega investors account for only about 1%. Most investors are regular people renting out a second home, not corporations buying entire neighborhoods.

• Institutional investor home purchases peaked at 2.4% of sales in Q2 2022 but dropped to just 0.3% by Q3 2024. Rising mortgage rates and home prices have made buying less attractive for them.

• The idea that Wall Street is buying up all homes is a myth, as big investors are purchasing far fewer properties than before. This shift could create more opportunities for regular buyers in today’s market.

A Unique Opportunity in the Windy City

• Chicago office properties are selling at massive discounts, with Class A CBD offices trading at an average of 66% below their previous values. Suburban Class A office assets have seen a 40% decline, creating a rare opportunity for opportunistic buyers.

• Office vacancies in Chicago and its suburbs remain high at 24.1%, with leasing activity yet to rebound. Lenders are hesitant to finance buildings with less than 60% occupancy, making it harder for struggling owners to refinance.

• Some investors are buying with plans to convert office buildings into residential properties, but feasibility depends on purchase price, demand, and city cooperation. Others are lowering lease rates or investing in property improvements to attract long-term tenants.

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Vidit

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