Why developers are taking a cautious approach to new McHenry County housing
With rising interest rates and question marks surrounding the economy heading further into 2023, developers with plans in McHenry County said they are taking a more cautious approach to new projects.
Despite the caution, many housing projects are slated to be built this year across the county, and municipalities aren't seeing a decrease in interest or activity going into the new year, officials said.
Redwood Living, one of the developers working in Crystal Lake this year, plans to build out this year in every market it is in, but those projects are coming with a "cautious approach" due to the market's volatility, Vice President of Acquisitions Kellie McIvor said.
"We're making sure all the deals we're doing are A-plus deals," she said. "But there are no plans to slow down."
Itasca-based Hamilton Partners Inc., which is part of the Enclave development in Crystal Lake, has a more "guarded" approach to new projects, with more scrutiny going into upcoming opportunities, partner Tim Beechick said.
"I think we're cautiously optimistic that there will be things we can get accomplished," he said. "We're at a new year and a new start."
As communities get further away from the COVID-19 pandemic, demand is changing, Crystal Lake Director of Community Development Katie Cowlin said. Specifically, municipalities are seeing a shift from residents wanting single-family living to more of a multifamily unit they can rent, such as apartments.
This is causing many to spread beyond the Chicago metropolitan area and look outward to the suburbs and even beyond that, officials said.
With remote work having boomed in recent years, new multifamily units also are seeing a heightened focus on amenities such as work spaces, Cowlin said. This, in turn, is affecting what kinds of projects developers are carrying out.
"It's not necessarily happening out here yet," Cowlin said. "But you're seeing that in newer developments."
Crystal Lake is slated to see several new builds this year, including Woodlore Estates, a single-family development on the north side of town; the Enclave at Crystal Lake with 99 residential units slated; and Clover Senior Living with 121 units. The Redwood subdivision, which will have more than 300 townhouses, also is starting work this year.
Beechick said new developments expanding out of the main Chicago metropolitan area have been successful, which he thinks could create more interest from builders to seek opportunity in outlying areas.
Townhomes, for example, are seeing more interest from people who want to have a homestyle-living arrangement but one in which they can rent instead of buy, Beechick said.
"People want more flexibility," he said. "I think it's the lifestyle. People don't want to be tied down. People want to spend their money on things that aren't a mortgage payment."
Increased access to transportation, schooling and a strong business climate are helping draw out people too, Beechick said.
McHenry is among the municipalities not sure if those trends will bear out for them, Director of Community Development Ross Polerecky said.
With only a couple of projects on tap, which Polerecky said is a steady number for the city, being on the outskirts of the area is a tough draw. Overall, he said he expects people to want to stay in the metropolitan area of Chicago, although he's hopeful that's not the case.
"That's how it is in McHenry. We don't see a whole lot of housing development for whatever reason," Polerecky said. "We're way out here."
Marengo is in a similar boat, Assistant City Manager Nick Radcliffe said. In past years, Marengo has been stuck in the middle of not having enough commercial business to attract housing but also has lacked the residents needed to bring business.
Even with people moving farther out, Marengo hasn't benefited from the trend.
The hope is that could start to look different this year, however, as Marengo seeks to draw development to its Route 23 and Interstate 90 corridor.
"Remote work will give people the chance to move out to the country and get a taste of the rural lifestyle," he said. "I don't know if that will happen with Marengo specifically, but I can see that happening."
Woodstock is not expecting to see much work in the way of residential development this year, but it already is seeing some commercial growth, Building and Zoning Director Joe Napolitano said.
The city's main priority this year is to make progress on the former Die Cast site, which should have a plan finalized this year. Whether it will break ground in 2023 is not yet known.
Napolitano said developers are always checking in with Woodstock, but certain economic factors, such as high interest rates, are starting to slow interest at the moment. Still, Napolitano said he's optimistic.
"We've got several sites available," Napolitano said. "But it's really up to [developers] if they want to take on that risk."
For McIvor, she sees a lot of opportunity for development in Illinois. Even with uncertainty, the state has remained a great market, she said.
"We're moving forward in Crystal Lake, Fox River Grove, Aurora and Volo," she said. "We have no plans to slow down. You want to make sure you have things in the pipeline."