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Sam Zell Expects Rebound for Office, Hospitality and Big-City Multifamily

Chicago’s own Sam Zell sees the future of certain commercial property sectors clouded by possible oversupply, but not so much by permanent shifts stemming from the COVID-19 pandemic. Office use, hospitality and central-city apartments all will rebound, while the industry icon sees potential for oversupply in a couple of currently hot sectors.

That’s among the takeaways from Zell’s wide-ranging keynote interview last week as part of the Harold E. Eisenberg Foundation’s REAL Bright Summit: Building the Future of Real Estate. The founder of Equity Group Investments was interviewed by Collete English Dixon, executive director, Marshall Bennett Institute of Real Estate, Roosevelt University.

On the question of whether the shift to remote working will be permanent, Zell observed, “I think that most of the discussion about working from remote locations is going to turn out to be irrelevant. We are social animals. We interface with each other. We create progressive results from one-plus-one-equals-three. As soon as the central business districts are back and alive and vaccines are pervasive, you’re going to see the office space market go back to where it was before.”

Similarly, Zell doesn’t think big-city multifamily is down for the count. “Anybody who thinks the migration to remote areas is a permanent move, I got a bridge to sell you,” he said. “If you go to Podunk, every day at 5:00 is the same and there’s nothing to do. The difference is that in Manhattan, you’ve got 27 things to do.”

Although individual second-and third-tier hotels may not survive the current downturn, Zell wouldn’t write off the lodging sector. “I think we’re going to go back to conventions, back to people creating relationships,” Zell observed. “I don’t see that changing, though it will restart slowly. There’s also a huge buildup of tourism demand. People have been locked up for almost a year now.”

Conversely, Zell was less enthusiastic about a couple of sectors that have seen their stars rise during the pandemic: “You now have builders building single-family homes for the sole purpose of adding to the rental pool. I’d be waving a flag about oversupply in this sector. I would say the same thing about distribution and industrial.”

Author of the 2017 Am I Being Too Subtle?: The Adventures of a Business Maverick, Zell shared insights in the Eisenberg Foundation keynote on subjects ranging from his upbringing as a child of immigrants to his belief in giving back through sponsoring entrepreneurship.

The evening featured a second keynote interview with a Chicago real estate leader, as an alumna of the Foundation’s mentorship program, associate board member Hanna Oimoen, interviewed her mentor, Penny Pritzker. Recounting her real estate career, Pritzker noted that one of her own mentors was Zell. Like Zell, Pritzker also provided her take on the post-pandemic outlook for the major commercial property types.

Click here to watch or read the interviews with Zell and Pritzker.

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About Paul Bubny

Paul Bubny serves as Senior Content Director for Connect Commercial Real Estate, a role to which he brings 13-plus years’ experience covering the commercial real estate industry and 30-plus years in business-to-business journalism. In this capacity, he oversees daily operations while also reporting on both local/regional markets and national trends, covering individual transactions across all property types, as well as delving into broader subject matter. He produces 15-20 daily news stories per day and works with the Connect team and clients to develop longer-form content, ranging from Q&As to thought-leadership pieces. Prior to joining Connect, Paul was Managing Editor for both Real Estate Forum and at American Lawyer Media, where he oversaw operations at both publications while also producing daily news and feature-length articles. His tenure in B2B publishing stretches back into the print era, and he has served as Editor in Chief on four national trade publications. Since 1999, Paul has volunteered as the newsletter editor of passenger rail advocacy groups (one national, one local).

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