Friday, August 9, 2013

Chicago's construction crisis

Well, perhaps the word crisis is too strong?  But still, Chicago isn't building enough new buildings fast enough.  Oh sure, there are new buildings going up.  But not enough.  Just check out this graph of construction [via Matt Yglesias]:

As you can see, Chicago is lagging behind other big cities.  And Chicago has no lack of available space.  I can't imagine seeing several acres of empty lots in downtown New York like you see in Chicago, and yet New York is in another league of construction compared to Chicago.  And it isn't like demand isn't there.  Startups in Chicago are causing a crunch:

Growth in Chicago’s startup community has led to a very tight market for appropriate office space, particularly in the River North neighborhood, according to a new report by CBRE.

Many of these companies seemed to be alums of 1871, the collaborative hub for digital startups that opened last year in the Merchandise Mart. Built In Chicago, an online community for the tech sector, counts nearly 200 digital startups that launched locally in 2011 and 2012.

Indeed, there is a boom in the West Loop already:

For the past few years the West Loop has seen a massive surge in development, as it rebounds from the recession. Apartment buildings, corporate offices, restaurants, bars, grocery stores and countless other forms of construction have taken places in the area. On Thursday, the city approved plans for the development of the Old Chicago Main Post Office. Meanwhile, scores of new residents have moved in to the new high-rises that make up a drastically changed skyline.

Since January of 2012, there have been 17 demolition permits filed in the West Loop area. Of those, 13 were the demolition of one or two-story buildings. As real estate practitioner Caplan notes, “older buildings [are] being knocked down for new development.”

While the news is encouraging, it is apparently not enough.  Or not fast enough.  Or both.  The question is why can't Chicago get approvals or financing for development?  Onerous regulations?  Too high construction costs?  Why aren't these projects rolling along at the pace of Atlanta or Dallas?