Chicago Commercial Real Estate Chat Recap from Industry Leaders at ULI CHICAGO’s 5th Signature Event
April 6th was a highlight for the Chicago commercial real estate industry where we enjoyed a fireside chat with two of our industry leaders, Kim Adams and Mary Ludgin. They shared their career progression with key takeaways on rejection, perseverance and what to expect on performance in various asset classes. Not only was the featured speaker, Mary Ludgin, phenomenal but, wow, what amazing talent in moderating by Kim Adams! The mutual respect and genuine desire for each other to succeed from these two competitors was inspirational.
On rejection and perseverance, Mary shared that she was a political science major with no real job prospects. While she hoped to work in commercial real estate, she was met with rejection. From there Mary went to work for Harold Washington. Upon his death, she finished her dissertation and took a job she loved at Dominick’s ensuring that she remained near commercial real estate while continuing to strive for an industry position. A year into her job, JMB, surprisingly called her back with an offer for her dream job in research and investment. By embracing each of her bosses’ jobs as they left, Mary climbed the ranks of JMB which is now Heitman.
A few valuable insights she shared on asset classes is to expect storage and apartments to perform well given the nature of their short-term leases which will outperform in an inflationary environment. Mary saw this trend in 1996 and now has 15% of their core fund invested in medical office and storage with an additional large percentage invested in multi-family real estate. Recognizing the opportunity in niche asset classes beyond the major categories earlier than most of the industry was a key “win” for Mary. However, Mary’s unique humility shined through as she also admitted to not anticipating the hot industrial asset class due to its historical poor ROI. She taught us that experience can be wisdom as well as create a blind spot.
So, who are the other winners? Surprising to many, physical retail is a winner due to the fulfillment trend to buy online and pickup in store. Last year showed more store openings than closings. Trophy office is a winner seeing low cap rates and strong leasing with great examples being 110 N Wacker and the Old Post Office building. The main loser “soul sucking 70’s and 80’s buildings”. These will no longer be office buildings going forward. On LaSalle Street, operating expenses are higher than the net operating income. The City of Chicago has been advised to use its TIF to support redevelopment as solutions are expensive and returns are minimal making underwriting of these projects nearly impossible.
Valuable Advice for Commercial Real Estate professionals
Mary’s practical advice… Be credible. Admit if you don’t know something and come back after you know. Be accountable. Have humility and own your “bad calls.” Each of us makes a mistake or two at points in a storied career. Listen to younger colleagues. Bring your whole self to work. Be authentic.
Kim ended us with Frank Lloyd Wright’s, “The good building is not one that hurts the landscape, but one which makes the landscape more beautiful than it was before the building was built.”