Experts say “small ball” is game plan for suburban real estate, construction

In the big game of suburban commercial real estate and construction, the strategy for 2011 is still “small ball,” according to local experts.

“We’re not seeing many home runs with our clients right now,” said Jerry Lopatka, managing principal of Dugan & Lopatka in Wheaton. “We are seeing a lot of singles and doubles.”

Lopatka’s comments were echoed by a panel of experts Thursday at the Newsmakers’ Forum on Real Estate and Construction, sponsored by the Daily Herald Suburban Business magazine and the Daily Herald Business Ledger and held at the Seven Bridges Golf Club in Woodridge.

Lopatka and the others noted that a number of factors continue to keep suburban construction and real estate from emerging from the recession. A high vacancy rate in existing real estate, coupled with weak demand for property, high unemployment and state and federal tax issues, continue to make for a sluggish market for new construction.

Jeffrey Ludwig, senior vice president and managing director of Alter 360° in Skokie, said vacancy rates of office space in the Chicago area is around 15 percent, while in DuPage County that rate is 19.2 percent. For industrial space, the rates are 15½ percent in the Chicago area and 19.2 percent in DuPage County.

As a result, large builders are bidding on smaller projects and residential builders are more focused on remodeling, according to Joseph Krusinski, founder and CEO of Krusinski Construction Co. in Oak Brook.

“I’m happy to be playing small ball right now,” Krusinski said.

The panel agreed that the Illinois business climate also has been a factor. While the state has many good things to offer business, recent tax changes and a lack of action from the state Legislature has made it difficult to do business in Illinois, and has led other states to try to lure businesses out of the state.

“This is still a place where people want to come to work, live and play,” said John Zediker, president and CEO of Moser Enterprises, Inc. in Naperville.

But Krusinski noted his experience is that Indiana “takes a high-level interest” in selling the state to Illinois businesses.

There are some positive trends, though. Zediker said that farmland prices are reasonable now, so buying land in a long-term hold strategy could pay off as the economy recovers.

“A patient investor with cash in hand – and it has to be cash – can make a good long-term investment in land,” Zediker said. “If you do that, you will be in a prime position when things turn in a few years.”

A more immediate return is to lease property, according to Ludwig. With the high vacancy rates, landlords are competing for tenants and are making deals that can eventually help businesses offset other costs.

“If you are a tenant with strong credit, you are a king right now,” Ludwig said.

The panelists all agreed the market likely has hit bottom. And there are signs that things could get better, but not in the immediate future.

“The market will continue sideways for some time,” Lopatka said.

Dugan & Lopatka, Comcast Business Class and Seven Bridges Golf Clubs were sponsors of the forum.