Real estate market growth is returning to many corners of the region, but it’s especially strong in Elgin, where new homes and commercial properties are rising at one of the fastest rates in Illinois.
Steve Wiedmeyer can remember when Pingree Grove had 70 homes and 120 residents. A village trustee for the past two decades and the current village president, Wiedmeyer has seen this sleepy hamlet become one of the hottest spots for homebuilding in Illinois.
In just the past five years, 1,000 new homes have been finished, most of them in D.R. Horton’s Cambridge Lakes subdivision and Carillon active-senior community, both located off Higgins Road. Wiedmeyer expects the village to add another 200 homes this year, keeping up a pace it’s held for the past few years.
“People move here, lots of times, because the kids moved here, the parents went to visit, and they loved it so much that they decided to move to Carillon,” says Wiedmeyer. “Or, it’s the other way around, where the parents move to Carillon and the kids love it so much they decide to stay.”
New businesses are cropping up in the form of new restaurants, small-scale retailers and service businesses such as dentists and veterinarians. There’s space for more commercial and industrial growth along nearby Illinois Route 47, Higgins Road, and U.S. Route 20.
“We asked Cambridge to set aside commercial land, so we have several acres that are waiting for development,” says Wiedmeyer. “It’s ready to build.”
What’s happening in Pingree Grove is, in many ways, an outgrowth of Elgin’s managed development. Similar to its western neighbor, Elgin is one of the hottest cities for post-recession homebuilding, with nearly 270 homes built last year and about 100 new homes permitted so far this year.
Elgin isn’t welcoming new homeowners alone – its commercial and industrial base also is expanding.
“Historically, over the past 8 to 10 years, Elgin has built 1.2 million square feet of industrial space each year, and it’s been absorbed within the year,” says Pete Nelson, construction manager and principal at Pancor, a commercial developer and contractor. “That’s attractive from an investor’s standpoint, because that’s a stable market that’s growing.”
Nelson is overseeing the construction of more than 161,000 square feet this year, most of it clustered around the Randall Road and Interstate 90 corridor.
Through the first half of this year, the City of Elgin issued 10 building permits for commercial and industrial properties. Throughout last year, the City issued seven.
Elgin, long accustomed to the ups and downs of the business cycle, is embracing this latest building upturn. Touting the city’s available land, diverse workforce, favorable tax rates and easy access to I-90, those who play the city’s real estate market are finding an eager audience in crowded Chicagoland. Homebuyers and businesses alike are finding opportunity.
“If you go east of Elgin, there isn’t much available, in terms of land, for large projects. Elgin is pretty much it,” says Tony Lucenko, director of Elgin Development Group, the city’s public/private economic development partnership. “You can go further west, but we have a lot of space here, and there’s proximity. Why go further west when you can come here?”
Commercial and Industrial Projects
To get a sense of Elgin’s development opportunities, take a look at the 20 business parks located within a mile of I-90. Count how many still have vacant land and a view of the highway.
“Elgin is not only near Chicago but O’Hare International Airport,” says Lucenko. “It’s situated along I-90 with three full-access interchanges. That’s a real draw.”
The Northwest Corporate Park on Randall Road at I-90 welcomes several new neighbors this year. Motorola Solutions just moved in, bringing a production center from Schaumburg. Across the street stands the growing concrete skeleton of a new, modern industrial building.
Nearby, Milwaukee-based Zilber Property Group is constructing a 257,000 square-foot industrial property on speculation, meaning it’ll build now and lease later. Rachel Agba, an acquisition and leasing manager for Zilber, is already fielding calls.
“Both private and public capital sees Elgin as a market worth investing in and will continue to do just that,” Agba says. “The current number of speculative facilities in Elgin and the adjoining municipalities speaks to the faith in projected growth of the I-90 submarket.”
Pancor’s new facilities also take advantage of location. In fact, highway visibility was an important draw for the Fabricators & Manufacturers Association, which is building on a frontage property, says Nelson.
This new building boom is a reflection of steady business growth, sources agree.
“In Elgin, we’ve got some available space, although we’ve seen a lot of current customers just expanding,” Nelson says. “They’re taking up more space by expanding at their current location.”
Builders are prepared to absorb even more demand in the coming year, as they raise some of the largest buildings available in this market.
“The average project in Elgin is about 80,000 square feet,” says Lucenko. “We have buildings going up right now that are in excess of 300,000 square feet, but divisible to meet varying space requirements.”
Nelson adds that they’re reaching ever taller. The extra clear heights are attractive for warehouses and anyone looking to maximize their footprint.
“We’re building at 32-foot clear heights, and 15 years ago, they might have been in the 24- to 28-foot range,” says Nelson. “Sophisticated users are recognizing the value of additional cubes of warehouse space, and they’re racking accordingly, so they’re getting a little better bang for their buck.”
Affordability is another key trait Nelson hears from potential clients. Compared with Cook County, property and sales taxes in Kane County are much lower, he says.
On the commercial side, retailers are realizing opportunities in the ghosts of the recession. Blain’s Farm & Fleet is preparing to open a new store inside a former Lowe’s on Randall Road in September.
Capstone Development Group is finalizing its plans to open 45 market-rate apartments in the Elgin Tower downtown. New businesses continue to spring up downtown and in the city’s nine retail districts.
“The window of opportunity is currently open, the market is good, all signs are pointing up,” says Lucenko. “Unemployment is down, the number of people employed in the workforce is higher than it’s been before. Every statistic you can look at, it’s all going in the right direction.”
New Homes on the Rise
On Elgin’s far west side, almost into Pingree Grove, new homes continue to rise from farmland in the Highland Woods subdivision. This master-planned community offers residents several natural areas, a homeowners clubhouse and an elementary school that’s part of northern Kane County’s District 301 schools. Homes here begin in the high $200,000s, but average in the $400,000 range.
It’s a community that caters to high-end homeowners and many move-up buyers, says Greg Overstreet, project manager of Overstreet Builders. It’s also a bellwether community for this family-owned custom and semi-custom homebuilder, and Overstreet says he feels a “softening” in the market.
He expects to close on eight homes in Highland Woods this year. “We closed nine or 10 the year before,” he says.
For the past five years, Elgin-area builders have averaged around 250 new homes a year, with 271 permitted last year. Pingree Grove has averaged 200 new homes a year, with 285 permitted last year.
Through the first half of this year, Elgin permitted 100 homes, keeping up one of the strongest building paces in Illinois. Pingree Grove also issued about 100 permits through June, while Huntley issued 78 and Naperville 118, according to municipal data.
Existing-home sales have slipped, but that doesn’t concern Barbara Schori, president of Realtor Association of the Fox Valley (RAFV). Rather, she’s encouraged by what she believes to be signs of a stable market.
“Whereas a lot of the market just collapsed in some areas and surged in some areas, I see Elgin as a fairly steady grower,” she says. “It’s not always declined heavily or lacked inventory.”
Through June, Elgin-area homebuyers closed on 9,422 homes, according to Midwest Real Estate Data LLC numbers provided by RAFV. Through last year, buyers closed on 19,306 homes – down just slightly from a 2014 peak of 19,677.
Homes sold at an average of 97 days this year and 98 days last year. Homes are selling closer to the asking price, which averages $203,000 for a single-family home.
These are positive signals for sellers and first-time homebuyers, says Schori. From what she’s seen, Elgin’s affordability is drawing first-time buyers and young families out of Chicago’s urban center. The market also proves attractive to older adults eager to downsize.
“I had a friend mention their children had been living in the city, and now they have young ones and they want to be in a more suburban area,” Schori says. They want to know more about Elgin, and they like it that they can just hop on the train and still get to work in the city.”
Buyers are finding a diversity of housing stock available in Elgin.
“There’s a price range for everybody,” Schori says. “There’s everything from historical homes all the way to brand-new construction.”
From an employer’s perspective, Elgin’s diverse housing stock reflects one thing: Hiring potential. Nelson, of Pancor, meets with many potential clients who are encouraged by the local workforce.
“It’s highly skilled and it’s diverse – not just in the makeup of people but in the range of skillsets that people have,” he says. “It’s socially diverse and economically diverse, and its schools address a diversity in skillsets. It’s got a great demographic profile.”
Challenges to Growth
If there’s one way to kill a sale on a new home, it’s a discussion on real estate taxes.
Overstreet Builders maintains model homes inside Elgin’s Highland Woods and a similar community in Naperville, but it’s Kane County where the sales force meets the most objections. The reason? Taxes bite hard on high-end homes.
“Individual counties will have to work on the property tax crisis in Illinois,” says Overstreet. “We are one of the highest property-taxed states in our country. The state has to find a fair solution and fix the problem.”
At the same time, Overstreet believes materials costs and new construction techniques are impacting the bottom line on new homes.
“The gap between new homes and existing homes has continued to grow,” says Overstreet. “Homes built today are much more energy efficient because of improved features including more insulation, thicker walls, better windows, more-efficient furnaces and air conditioners, and homes built with much less air infiltration. Unfortunately, to build this superior product, the cost is higher.”
Lucenko, the director of Elgin’s economic development partnership, hears far more concerns about the shaky condition of Illinois’ state government – which raises an entirely different discussion on taxes.
“Businesses want to know that next year the state government won’t levy another state tax on them because they need to pay for insufficiencies in the budget,” says Lucenko. “Businesses need to plan for that kind of thing. You can’t all of a sudden start imposing taxes and fees, things that aren’t predictable.”
Pancor’s Nelson also believes the state budget mess is being felt at the local level.
“A lot of municipalities went through staff reductions during the tough times of 2007,” Nelson says. “With the current situation, many municipalities are hesitant to fill those positions and we’re not getting through the process as quickly as we might have.”
When staff shortages lead to delays in permitting, planning and construction, time becomes money.
“We’ve got very sophisticated customers who will quite often ask, ‘How long does it take to get things through a municipality for permitting?’” says Nelson. “They’re trying to make their long-term plans, and the last thing they want is to have a planned move-in date, knowing it only takes X amount of time for construction, but that their timetable is completely at the will of the municipality.”
To Elgin’s credit, City officers do their part to fast-track building permits when possible. Nelson’s clients appreciate the help because they value certainty.
“Everybody wishes they could control the timeline a little better,” he says.
Exciting Things Happening
Schori is a tireless advocate for the Elgin area. After spending nearly 25 years marketing local real estate – 20 of them while running her own firm – she’s seen the booms and busts. She’s eager to highlight the benefits of living on Chicago’s western frontier.
“My children grew up in Elgin and attended the schools, and now they live nearby,” she says. “I just love this city.”
Pingree Grove’s village president, Wiedmeyer, sees that same charm in his community. A transplant from Sleepy Hollow, he’s spent 20 years on the edge of Chicagoland. Though his community is exploding with new residents and is expecting a new subdivision in the coming years, he feels Pingree Grove hasn’t lost its small-town culture.
The kids still ride their bikes down to the new ice cream shop in the old part of town. Neighbors host block parties and wave to strangers. It’s the best of both worlds: city and country.
“We’re out in the country, so you can still see the stars, but if you need milk, you can drive a few minutes to get it,” he says. “It doesn’t have the congestion you get in a downtown setting. I imagine it’s going to, some day. But that’s not now.”