April Networking Program: An Autopsy of the Millennial Boom

By Sue Matejcak, Jones Day

At CREW Chicago’s April Networking Luncheon, held at the East Bank Club on April 24, 2013, attendees were treated to a fascinating presentation by Dr. Rachel Weber, Associate Director for Research and Program Development, Great Cities Institute and Associate Professor, Department of Urban Planning and Policy at the University of Illinois at Chicago.  Dr. Weber presented findings from her soon to be published book "Why We Overbuild".  She focused on what she termed the “Millennial Boom” (roughly 1998-2008) and drew upon an in-depth case study of downtown development, tenant relocation, and public policy in Chicago's Loop during that period.

Dr. Weber began by explaining a bit about building booms and overbuilding.  A typical building boom lasts approximately ten years with 8 to 10 years of relative dormancy between boom cycles.  Building booms vary in magnitude.  For example, 36% of all office space ever built was constructed during the boom of the 1980’s, compared to 18% constructed during the Millennial Boom.  She also explained some of the difficulties involved with defining “overbuilding”, with her definition being “space that is not occupied during the boom cycle in which it was completed.”  Using an index she created, Chicago was roughly in the middle of pack as far as being overbuilt during the Millennial Boom when compared to other cities.  Dr. Weber also explained the two different theories that explain what drives a building boom.  One theory focuses on the demand side (such as changes in preferences from building users, greater numbers of workers who need space to work, etc.); the other theory focuses on the supply side (such as a surplus of capital when other investment avenues become less attractive and real estate becomes the outlet for funds that might have gone elsewhere).

According to Dr. Weber, the Millennial Boom in Chicago actually occurred in two waves.  The first wave started slowly and was more demand-driven.  But after the dot.com crash and the attacks of September 11, things slowed down.  Gradually, things began picking up again, particularly in the West Loop, and this second wave was fueled more by an increase in the supply of credit. Some unique hallmarks of the Millennial Boom were the large percentage of developments that involved a change in use (especially office to residential conversions) and a surge in acquisition activity (87% of the office buildings in Chicago changed hands at least once during the Millennial Boom).

Dr. Weber noted that, if past experience holds true, we are due for another building boom soon.  Given the decreasing amount of undeveloped space, the next boom will likely have to involve a lot of demolition or creative repurposing of existing space.

The program closed with a spirited question and answer period. It was obvious that, whatever the next building boom may bring, the women of CREW will be in the thick of it.

See more photos of this event.....