INDUSTRIAL - RETAIL - LAND - OFFICE - DEVELOPMENT - BUSINESS BROKERAGE
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FROM THE DESK OF BRUCE BOSSOW
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People keep asking me if the market has slowed down recently with the increase in interest rates. Our first half of this year was record breaking for our 31 year old firm. Our closed sales and leases were up a whopping 92% over last year at the halfway point. This is better than any previous year. I might add that last year was also a good year. That all happened when rates were low. I don’t see the 2nd half pace being quite as active. Our biggest challenge is replacing all the inventory we sold or leased. Demand seems to still be there, especially in the Industrial property type. Supply of buildings continues to be our dilemma. The SBA loan rate is still in the high 4’s, so debt service costs are still reasonable. But if you’re thinking of moving, I would suggest not waiting for rates to drop.
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Featured Listings Available Now
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171 E. Higgins Rd.
Gilberts, IL 60136
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GILBERT INDUSTRIAL LOT
Gilberts - .94 acre lot zoned industrial on Rt. 72. Suitable for up to 7,000 SF building with well and septic. Priced Reduced to $164,900
Broker: Sharon Glasshof
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650 E. Terra Cotta Ave.
Crystal Lake, IL 60014
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RETAIL OR OFFICE SPACE
Crystal Lake – 746-2,808 SF space in popular Terra Cotta Corners. Rt. 176 traffic counts 16,200 cars per day. At signalized intersection with monument signage. $12-16 psf Net rents.
Brokers: Mike Deacon & Heather Schweitzer
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5700 Walnut St.
Richmond, IL 60071
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RARE INDUSTRIAL BUILDING
Richmond-42,000 sq ft industrial building on 2.24 acres just off Rt 12. 11-21’ ceilings, 5 DID’s, 400 amps. Fenced yards for outdoor storage. Flexible seller. Only $40 psf!
Brokers: Bruce Kaplan & Kevin Kaplan
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1207 3rd St.
McHenry, IL 60050
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MIXED USED INVESTOR/USER
McHenry - 2,700 SF 1st floor retail (will be vacant) plus 4 rented 1BR/1BA apartments generating $40,200/yr. .55 Acre. Potential for additional buildings. Drive-thru window. Brick construction. Rt. 120 visibility. C-5 Zoning. $499,000
Brokers: Bruce Kaplan & Kevin Kaplan
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3114-3118 N. Chapel Hill Rd.
Johnsburg, IL 60051
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COMMERCIAL LAND
Johnsburg - 1-6 acres on Chapel Hill Road, zoned B-1. 10,150 cars per day. Only $2.96 psf
Broker: Brian Cowell
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9705 Prairie Ridge Rd.
Richmond, IL 60071
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FORMER BANK BUILDING
Richmond – 9,985 SF freestanding, 2-story brick building on 1.29 acres. Built in 2004. Elevator, 52 car parking. Ideal for retail or office use. $1,200,000
Broker: Heather Schweitzer
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New Appraisal Rule - Up to 10% Shortfall Allowed
Don’t let an appraisal shortfall derail your deal! Newly implemented rules allow for up to a 10% shortfall in appraised value!
On July 29, 2022, SBA released SBA Procedural Notice 5000-835230, revising the requirement from 95% to 90% of the estimated value of the commercial real estate. This change is effective for loans approved on or after July 29, 2022.
Under previous SBA procedures, if the appraisal was less than 95% of the estimated value of the commercial real estate, the debenture had to be reduced or the CDC had to secure additional collateral or additional investment from the Borrower and/or guarantors. SBA is revising SOP 50 10 6 to change the requirement from 95% to 90% of the estimated value of the commercial real estate.
Preserve your customer’s working capital by utilizing Growth Corp's 504 Loan Program and its more favorable appraisal requirements.
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RECESSION? NOT YET!
Conditions for a technical recession — two consecutive quarters of negative real gross domestic product growth — have been met. Real GDP fell by annualized rates of 1.6% and 0.9%, respectively, in the first two quarters of 2022. But the first half of the year hardly resembles a typical recession, which is officially designated by the nonpartisan arbiter of such things, the National Board of Economic Research, which weighs several factors including personal spending, personal income, employment, wholesale and retail sales, and industrial production.
Anomalies abound in the first half of 2022. Investment activity, and in particular changes in inventories, dragged economic output down in the second quarter. Consumers, meanwhile, contributed 0.7 percentage points to real GDP growth in the second quarter, after accounting for 1.2 percentage points of economic growth in the first quarter.
As consumers account for about 70% of GDP, it is rare for consumption to grow while the economy overall contracts, but it’s not unprecedented. The last time it happened was in the first quarter of 2014, when extreme weather disrupted production and dismal global conditions dragged net exports lower. Three of the four components of GDP fell into negative territory in that quarter, with only consumption growing — but not fast enough to pull the economy out of its dive. Real GDP also contracted in the first and third quarters of 2011, back when the Federal Reserve’s implementation of a bond- and asset-buying program known as QE2 effectively injected money into the economy and forestalled a double-dip recession.
Consumers have certainly become more cautious since the middle of last year compared to the robust recovery from the pandemic seen in earlier quarters. Spending has been shifting toward services for the better part of the year, but durable goods surprisingly spiked in June, according to a separate release from the Bureau of Economic Analysis . Overall, personal consumption expenditures grew by 1.1% in June, but durable goods still grew by 1.5%. A large portion of the increase came in the form of motor vehicles and parts, including new trucks (4.1%), new cars (3.1%), and used trucks (1.5%).
Meanwhile, inflation drove growth in spending on nondurable goods, including gasoline and other energy expenditures, which were up by 9.7% over the month. And in transportation services, spending on air trips specifically grew by 2.7% as travel continued to rebound. In inflation-adjusted terms, spending on nondurables fell by 0.4% in June, but real spending on durables still rose by 0.9%, allowing overall consumer spending to hold onto gains, growing by just 0.1% over the month.
But back to inventories. The depletion of store shelves caused real GDP to fall in the second quarter. In periods such as this, changes in inventories cause an accounting maneuver that can confuse readers of economic growth statistics. During the second quarter, inventories rose by $81.6 billion, compared to an increase of $188.5 billion in the first quarter and $193.2 billion in the fourth quarter of 2021. Higher inventories should translate to higher GDP, as they represent finished goods. But real GDP growth factors in the change in the change in inventories , so even when stocks are increasing, if a gain in inventories in one quarter is smaller than the gain in the prior quarter, GDP records that as a subtraction from growth.
In the second quarter, the smaller build-up in inventories compared to the prior quarter caused two full percentage points to be subtracted from real GDP growth. In contrast, back in the fourth quarter of 2021, the massive build-up in inventories added 5.3 percentage points of the 6.9% in real GDP growth. At the time, it was widely believed that the rapid growth in inventories would hurt real GDP growth sometime down the line, which it did this past quarter.
In another sign that the economy is not in a recession, real net exports, consistently a negative value, grew in the second quarter and contributed 1.4 percentage points to overall economic growth — a positive sign but not enough to outweigh the negative contribution of the change in inventories. Real exports rose by an annualized rate of 18% over the prior quarter, after falling by 4.8% in the first quarter. Meanwhile, a global slowdown and the war in Europe caused imports to rise by just 3.1%, far slower than the double-digit gains in the prior two quarters. Imports of physical goods were flat, but imports of services, such as spending by Americans traveling abroad, grew by 21.1% during the second quarter.
After considering these accounting practices, it would be hard to describe the economy as being in recession. Real GDP grew by 1.6% year over year in the second quarter of 2022, slower than its annual growth in the prior two quarters and below its pre-pandemic 10-year average of 2.3 percent, but the economy is still expanding. However, inflation remains uncomfortably high, and it may take some time for the Fed’s tightening policy to take effect, leaving consumers and businesses uncertain about their own spending and probably reining in activity further. Hence, the outlook for real GDP is bleak.
One more development to worry about: The yield curve between the two-year and 10-year Treasury note has been inverted for almost a month, a sign that the bond market expects a recession to occur within the next six months.
What We’re Watching …
Let’s not forget to mention the biggest reason that we’re not in recession yet — the seemingly unending strength of the labor market. The country has never experienced a recession without job losses. The Labor Department’s jobs report for June is set to be released this Friday and will be scoured for signs that things are cooling down. Wall Street is anticipating that firms added 250,000 positions in the month, slower than in previous months but still more than the monthly average for the five years before the onset of the pandemic. With job openings still at very high levels, and initial claims for unemployment benefits still very low, it seems we’re still far from seeing evidence in the labor market that a recession has arrived. Stay tuned.
CoStar Economy is produced weekly by Christine Cooper, managing director and chief U.S. economist, and Rafael De Anda, associate director of CoStar Market Analytics in Los Angeles.
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Bruce Bossow x 12 / C: 847-732-3462
Bruce Kaplan x 20 / C: 847-507-1759
Heather Schweitzer x 15 / C: 815-236-9816
Heide Casciaro x 26 / C: 847-774-5660
Joe Billitteri x 21 / C: 847-833-5004
Kevin Kaplan x 13 / C: 309-261-0920
Sharon Glasshof x 14 / C: 847-533-6974
Brian Cowell x 18 / C: 815-529-7890
Mike Deacon x 28 / C: 815-814-6500
9225 S. IL Route 31
Lake in the Hills, IL 60156
847-854-2300
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