by Dan Rafter
Starting this year, finance veteran Breck Hanson took on a new role at Chicago’s Associated Bank, when he became the institution’s vice chairman. In this new role, Hanson will continue to focus on building the bank’s commercial real estate business while also developing new revenue streams for Associated Bank.
As he looks toward 2016, Hanson said that he expects another strong year for both Associated Bank and the Chicago commercial real estate market in general.
Taking on new challenges: It’s no secret that I’ve been a senior guy here in the Chicago commercial real estate market for quite some time. About a year ago, I was asked to be the local president for Associated Bank in Chicago, a position that I gladly accepted. In that position, I became more deeply involved with our leadership team here. The depth of talent we have at Associated Bank in Chicago is extremely impressive. It is a deep roster of talent.
I was considering slowing down. But our chief executive officer, Philip Flynn, asked me if I’d stay and become vice chairman of bank. He asked if I’d be interested in helping out in a number of ways. This job is still developing. Its focus, though, will be the Chicago market. I’ll be focusing on the revenue parts of our business company wide, and I’ll be discussing and developing new revenue streams throughout the bank. I’ll also be further enhancing the successful revenue streams that we already have. And it also looks like I’m basically becoming the go-to guy for just about anything and everything.
Ready for another strong year: In terms of production, our Chicago team members had probably their best year ever in 2015. Companywide, we had new production of more than $2.5 billion dollars of new real estate commitments. And the Chicago market probably accounted for about a third of that, so our Chicago team had a very strong year. We don’t expect to see a lot of slowdown for 2016.
Watching multifamily: I can tell you, that regulators and banks are beginning to look at multifamily as a product type to watch and be a bit wary of because of the extensive growth it has gone through in the last three years in almost all markets. Certainly that holds true in Chicago, too. We have had a lot of new multifamily product here. Because of that, I believe that we will see rents level off because of the availability of product. We will probably see banks being more selective in terms of what projects get done.
One of the lessons we learned from the recession is that you need diversity in your portfolio. If you’ve been in the real estate business for the last two or three years, you’ve lent money on multifamily projects. We are watching closely what percentage of our real estate portfolio is made up of multifamily, what percentage of our capital has multifamily exposure.
Office on the rise: There are a few decent-size office projects under construction now in Chicago. That is a good sign for that sector. Both of those projects are leased in excess of 50 percent right now, so that is another good sign. I think there is a need for a couple of more new office buildings in the city. A lot relates to transportation, of course. If you look at major cities, New York being the best example, office property near train stations historically does well. That has historically been the norm. That is something that we going to see more of in Chicago, I believe.
A changing retail market: All the retail we have seen has been what you would call infill. Obviously, the residential building in Chicago has become very prolific. People’s tendencies are to live in urban areas today. Because of that, much of the retail we’ve seen is infill retail. There is a caution with that, though. A lot of us have gotten used to this Amazon way of shopping. That continues to hurt storefront retail. What is often driving retail growth today are restaurant and entertainment tenants. Historically, financing restaurants and entertainment options ranged from a “caution” to a “no-no” for banks. And yet, today we are seeing some very successful ventures in the restaurant and entertainment space.