Cook County, home to the iconic Windy City, is facing a slew of challenges on multiple fronts. One of the most pressing issues is the spiraling property taxes, which have seen a dramatic surge in recent years. Particularly in the suburbs, homeowners and business proprietors have been hard-hit. Residential properties in some areas experienced a staggering 127% increase in two decades, while some business properties in the suburbs saw even steeper hikes.

But property taxes are just the tip of the iceberg. The broader real estate sector in Chicago is engulfed in uncertainty, with over 80% of commercial real estate professionals anticipating a bleak 2023, according to CoStar. This number is up from 65% the previous year and is fueled by concerns about rising crime, recent political shifts with the election of Mayor Brandon Johnson, heightened interest rates, and looming recession worries on a national scale.

The Real Estate Center at DePaul University and the Urban Land Institute Chicago District Council’s report paints a similar grim picture. Astonishingly, more than three-quarters of the professionals expect the U.S. to face an economic downturn by the end of the year. However, not all is gloomy – close to half are still optimistic about the latter part of 2023, and 38.6% hold a positive outlook for 2024.

Another pressing issue in this intricate puzzle is the surge in tax appeals, which has placed Chicago as the second-most popular U.S. city for such actions, behind only Kansas City, MO. As James Shilling, a finance professor at DePaul, succinctly put it, the current market dynamics are unparalleled. And while employment figures show promise, the real estate sector’s challenges seem unrelated to housing, which is a departure from patterns observed in previous recessions.

Local investors are keenly monitoring Mayor Brandon Johnson’s initiatives, hopeful that an increase in downtown office workers might offset the declining property values, especially for older office buildings in the Loop business district. Despite the potential, some landmarks, such as the Chicago Board of Trade Building and the Civic Opera Building, face the possibility of selling at substantially reduced rates or confronting monetary difficulties.

The shifting nature of work is an additional complicating factor. The trend towards remote work is exacerbating the decline in demand for office spaces. As Greg Warsek of Associated Bank remarked, the office sector’s desirability has dimmed, a sentiment that’s unlikely to change in the near future as a result of the work from home movement catalyzed by the pandemic.

Couple this with Cook County’s unpredictable property tax rates, and it’s evident why the real estate landscape is tumultuous. As Mike Kamienski from Baker Tilly underscores, these variable tax rates are formidable barriers for finalizing deals in the city, catalyzing tax appeals as a means to ease some of the burden off of the shoulders of property owners.

However, it’s not all doom and gloom. Sectors such as industrial properties, data centers, and multifamily housing are showcasing resilience. But, like all other facets of the market, they too aren’t insulated from the broader economic uncertainties.

As Mary Ludgin of Heitman aptly mentions, the strategy for many may be to invest amidst this uncertainty, banking on brighter days ahead.