The Deal Market: Residential, Commercial, & Development 7-8-26

Summary

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Becker Business Podcast – Episode Summary

Episode: The Deal Market: Residential, Commercial, & Development
Host: Scott Becker
Date: July 8, 2026
Panelists:

• Paula Avanam (Bearden Warner, Realtor, North Shore/Chicago/South Florida)
• Rick Levin (CEO, Rick Levin & Associates, Real Estate Auctioneer)
• Ken Motu & Michael Motu (MOTU Properties, Residential & Mixed-Use Developers)

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Main Theme

This episode provides a wide-ranging discussion of the current state of the real estate market, covering residential, commercial, and development sectors. The expert panel addresses market shifts post-pandemic, changing attitudes toward renting and owning, the impact of hybrid work, challenges in development, auction trends, and what they're watching most closely in the industry today.

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Key Discussion Points & Insights

1. Residential Market Update – Shifting After the Seller’s Frenzy

• Inventory & Market Balance:
  • Since COVID-19, the market has favored sellers due to low inventory and high demand.
  • The tide is turning—still not a buyer’s market, but less extreme than the previous years.
• Changing Buyer/Seller Dynamics:
  • Multiple offers remain, but buyer behavior is shifting. Sellers are now negotiating (e.g. offering credits).
  • Bidding wars and extreme offers well above listing are less common.
  • Many buyers now opt to stay in rentals or with family rather than compete, often citing interest rates as a deterrent.
  • “You’re still seeing multiple offers. But before this year, sellers were not negotiating any seller credits. Buyers were offering up to $200,000 above list price... Now, sellers are actually starting to offer some seller credits.” – Paula Avanam [03:20]
• Interest Rates:
  • Rates feel high relative to the pandemic period but are not high historically.
  • Those expecting sub-3% rates again may be waiting for a crisis scenario—unlikely in near-term.

2. Rental & Development Market – Tight Supply and Rising Rents

• Extreme Demand, Limited Supply in Chicago:
  • Rents have gone up significantly. Retention and renewal rates are at record highs.
  • Chicago remains undersupplied—about 26,000 units short.
  • “You want rental pricing to come down, build more buildings and it’s very difficult. The city of Chicago is not an easy place to build.” – Ken Motu [07:07]
• Development Shifts:
  • MOTU Properties is focused on both adaptive reuse and ground-up construction, mostly smaller 30–60 unit buildings.
  • Supply constraints keep upward pressure on rents despite the wish to remain tenant-friendly.
  • Location continues to matter, especially in "premier north side locations" (Lincoln Square, Old Town, West Loop, Humboldt, Logan Square).

3. Renting as an Asset vs. Ownership

• Changing Perceptions Among Younger Generations:
  • Renting is losing its stigma and is now seen as a strategic choice for flexibility and mobility.
  • Entry barriers for buying—high mortgage rates, large down payments, competitive bidding—make renting more attractive/logical for many, especially Gen Z.
  • “I think renting actually opens a lot of doors... It gives you freedom—you can move when you want and I really do believe that has become more of an asset and not ‘oh, you don’t own.’” – Ken Motu [28:01]
• Family Support Still Remains Key:
  • Parents often help with purchasing, further bifurcating opportunities between those with family wealth and those without.

4. Florida Market Compared to Midwest

• Florida: From Frenzy to Softening:
  • Price reductions are now common ("price improvements").
  • The region faces unique challenges, such as HOA assessments (especially post-building collapse) and overbuilding in certain segments.
  • “It was this whole frenzy... Now it is, the construction—they’re still building a lot. But… there was this HOA issue when the building collapsed in Miami… reassessment now and all these special assessments coming up.” – Paula Avanam [19:03]

5. Auction Market Trends

• Who Uses Auctions and When:
  • Auctions are beneficial for urgency, difficulty in asset valuation, or necessity (e.g., divorce, estate liquidations, corporate/bank sales).
  • Peak activity often comes during crises/disruptions, but even in hot seller’s markets, auctions can be underutilized due to perception issues.
  • Mortgage rate “lock-in effect” creates “prisoners” who don’t sell, compounding low supply.
  • “People got locked into mortgages at 2.65%, 3% interest, and they're looking at rates today at 6.5. People don’t want to talk about it, but they're kind of prisoners to their home.” – Rick Levin [15:09]

6. Impact of Remote/Hybrid Work

• Transformation of Office Real Estate:
  • Smaller office buildings are being converted into residential units (especially in River North, Chicago).
  • Apartment rehabs now account for remote work: in-unit workspace, added amenities like co-working spaces, gyms, rooftop decks—even in smaller buildings.
  • Panelists note a visible change: far more tenants are home during business hours.
  • “Not only are… people [not] working in the Loop—they’re converting everything in the Loop to residential... We have this joke in our business, when we walk through a building… everyone’s always home.” – Michael Motu [21:42]
• Parking Garages & Electric Cars:
  • Anticipated disruption as self-driving cars, changes in car ownership/use, and heavier electric vehicles affect parking infrastructure.
  • “Parking garages… have garages inside, [but] were not built to hold the electric cars which weigh three times more… There’s going to be a lot of central business district real estate that’s going to have to be well thought of.” – Rick Levin [23:28]

7. Adaptive Reuse & Development Economics

• Cost Challenges:
  • Adaptive reuse, once markedly cheaper than new construction, now nearly matches in cost per square foot due to construction inflation and complexities.
  • MOTU is pivoting towards ground-up development when feasible.
  • “We figured it’d be at $165 a foot. We’ll be lucky if we get it done for $200 a foot now… Mike and I have started to look at building ground up construction.” – Ken Motu [29:05]

8. Emerging Trends & Most Interesting Issues to Watch

• Parking & Office Buildings:
  • What will happen to surplus parking garages and outdated office buildings not suited for residential conversion?
• Data Centers & Infrastructure:
  • Soaring demand for data centers runs into local opposition over power/water needs, with massive implications for investment portfolios and municipal planning.
  • “The most interesting thing I’m looking at is data centers… how are we going to get the power to power all these data centers?... A lot of these municipalities are saying not in our town, don’t build it.” – Rick Levin [31:10]
• Gen Z’s Preferences:
  • Demand for easy, multi-use living—walkable environments, in-house amenities, convenient retail/café options.
  • “The Gen Zs… want everything to be easy. If you can build, you know, a coffee shop with this shop or that and have a few residentials above, you’re in good shape fast.” – Paula Avanam [30:10]

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Notable Quotes & Memorable Moments

• Market Evolution:
  • “If we ever see the rates at that low again, that means we have a real bad situation in our hands, and it’s just not happening.” – Paula Avanam [05:22]
• Real Estate as Family Business:
  • “Growing up, my father was a doctor… We were the real estate guys… As good a guy as they come, your brother as well. So I just was curious as to how that all went as you guys ended up in real estate and doing tremendously well.” – Scott Becker (w. Motu brothers) [11:25]
• On Tenants Staying Put:
  • “If we raise you 5%, you can’t go find a similar apartment for the same rent in the city.” – Ken Motu [09:28]
• Changing the American Dream:
  • “They’re chasing this ideal of homeownership and that American dream, if you will… trying to buy and they just… are kind of chasing this ideal.” – Paula Avanam [17:34]
• Potential of Parking Garage Redesign:
  • “When you look at all the parking garages… I feel that those cars won’t need to park in the garage because your car will let you off, it won’t go park—it’ll go out and make you money by picking up other people during the day.” – Rick Levin [23:28]
• Gen Z at Cafés:
  • “My oldest son is always at the cafe and he says it’s a cafe… Everybody’s working there… they have their computers… and they’re really focused.” – Paula Avanam [26:00]

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Timestamps for Key Segments

• Panelist Introductions & Market Context: [00:00–02:32]
• Residential Market Trends (Paula Avanam): [02:32–05:41]
• Rental & Development Market (Motu Brothers): [06:02–10:49]
• Auction Market Insights (Rick Levin): [12:08–16:26]
• Gen Z & Affordability Challenges: [16:43–19:03]
• Florida vs Midwest Market Comparison: [19:03–20:22]
• Impact of Remote/Hybrid Work: [21:21–23:28]
• Parking Garages, Electric Cars, and Urban Land Use: [23:28–24:57]
• Shifts in Renting/Ownership Attitudes: [28:01–29:05]
• Adaptive Reuse vs New Development Economics: [29:05–29:48]
• What’s Most Interesting Right Now (Roundtable): [29:57–31:52]
• Wrap & Closing Remarks: [32:10–end]

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Final Thoughts

This conversation highlighted dramatic shifts in real estate across all asset types. While supply remains constrained and the fallout of pandemic-era rates continues to shape decision-making, new development, adaptive reuse, and urban redesigns are emerging focal points. The generational shift in attitudes toward renting, as well as the transformation of work and lifestyle preferences, are fundamentally reshaping the market. Innovations and challenges in infrastructure (like data centers and parking) indicate that real estate remains at the center of fast-moving social, technological, and economic change.

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Transcript

[A]

This is Scott Becker with the Becker Business and the Becker Private Equity Podcast. This episode is called the Deal Market, Residential, Commercial and development. Here we've got four fantastic panelists. Paula Avanam, Bearden Warner, which is a tremendous entrepreneur and also real estate leader and broker. She's at Beard and Warner, she's in South Florida, she's in Chicago and just a tremendous at what she does. Second is Rick Levin, probably the preeminent auctioneer in the country when it comes to real estate. He's the CEO and founder of Rick Levin and Associates. Few people with Rick's talent at what he does. Finally, we've got two brilliant brothers that are leaders of MOTU Properties. They've just done a tremendous job of building, developing and investing in residential real estate and some commercial real estate, but just tremendous leaders in the apartment complex world, the residential world with some mixed use. There we've got Ken Motu and Michael Motu, two fantastic leaders. So again, Paula Avanam, Rick Levin, Ken Motu, Michael Motu, a brilliant crew, residential, commercial and development. Thank you for listening to the Becker Business and the Becker Private Equity podcast. Thank you. I want to introduce our panelists or ask them to introduce themselves. We'll have a broad ranging discussion around real estate in the real estate world today. We've got great, great panelists. Let me ask Paula, can you start because you do so many different things in real estate. Take a moment and introduce yourself. Then I'll ask Ken and Michael Motu from Motu Properties to do so. And then Rick Levin, Paula.

[B]

Hey everyone. My name is Paula Avenum and I live in the North Shore. I live in Highland Park. I have been Realtor in the housing market since 1999. I started off in the mortgage and title industry back then after college I worked at the Chicago Mercantile Exchange, went into the fast paced mortgage business and then got my real estate license eight years ago. Best decision I ever made. And I service throughout the North Shore a lot in Chicago as well. I'm also licensed in Florida and I'm heavily involved in leadership throughout Illinois which has been great, a great learning curve just to help me understand the business better in Illinois.

[A]

Thank you. Take one second. Because you live in the residential sector, Ken and Michael live more in the commercial and development sector. Take a second on the residential sector. What does the market look like today? For a little bit it seemed like not nearly enough inventory, at least in some markets to sell. What does that look like today? Is that evening out at all or what does it look like for a home buyer, home seller, Today?

[B]

Yeah, it's a great question. And it has been pretty much since COVID It's been really a seller's market on so many different levels. You know, it was just low inventory. People didn't want to show their homes, and for a slew of reasons. And that carried on, really, until this year, where the market is starting. It's not a buyer's market. It's just not as much of a seller's market as it has been. You know, we're seeing the big thing. The big shift that I'm seeing is that where, you know, you're getting 10 offers on the table for every single listing that was coming on the market. True story. And now you're seeing. You're still seeing multiple offers. But before this year, sellers were not negotiating any seller credits. Buyers were offering up to $200,000 above list price. Then they were waiving all of the contingencies per the seller's request. When they had multiple offers, the only way you were going to outbid someone else is if you waived, having an inspection. Waived multiple, multiple, pretty much every contingency, even the mortgage contingencies. So I'm seeing that shift right now where sellers are actually starting to offer some seller credits. They're looking more at the bigger picture. Buyers are holding back a little bit. They're, you know, they don't want to get into these bidding wars. They're deciding that they'll stay in their rental home or live with their parents a little longer, whatever their situation is, and wait. They're saying they will wait a little bit longer. I don't. If you see the home you love and you can get into in it in a reasonable, you know, without going 200 above and not get into these crazy situations. Some of these. Some buyers are thinking they're waiting because the rates are high. That's a whole nother conversation. Because really, historically, the rates are not high. So you just need to talk to a really good, you know, have a good realtor, have a good team, talk to your lender. Because the rates really. It was just an very unusual situation, of course, having the pandemic. Right. Probably, hopefully, God forbid, never see that in our lifetime again. But that created this whole ripple effect, you know, because they needed to boost the economy and we were in a crisis. If we ever see the rates at 2, at that, that low again, that means we have a real bad situation in our hands, and it's just not happening. Un.

[A]

No. Thank you so much. And you do see some of that market evening out just A little bit, yes. Where it's been such a seller's market and one of the challenges with the seller's market, somebody, somebody sells their house and then they don't know where to go. Quite frankly, you see that challenge in such a seller's market too. Kenny and Michael, tell us a little bit about what you do in the history of MOTU Properties.

[C]

Hi, Ken Motu. Michael can button anytime as well. I will. Michael and I started Motu Properties 16 years ago. We own and manage about 100 buildings in the city of Chicago, all north side, all rentals. We don't condo, we don't sell. We very rarely sell what we, we own. And, and we do adapt, adaptive reuse and we do existing buildings that we rehab. Every one of our buildings we buy, we got and then rent them and

[D]

we do ground up development.

[C]

And would you. Correct.

[D]

Although that's, that's relatively new for us.

[A]

And what are you seeing in that rental market today? Rents have been going up so much the last several years. Are they still going up like that? And what do you see in the development market? I mean we see in some of the areas that we live in or see these significant condo or rental buildings going up, not nearly enough, but we see some of them. But what do you see out there in the rental market as well as the investment market?

[C]

There's very little supply. I mean look, you want rental pricing to come down, build more buildings and it's very difficult. The city of Chicago is not an easy place to build. We're fortunate, we understand it, but it's still very difficult for us.

[D]

And I think it's also worth noting like we in Chicago, it's true, you don't see a lot of cranes in the sky. And I think sort of the, the conversations around the Chicago real estate market and our asset class are like you have these other developing states that are in the sun belt that overbuild and are stuck with supply and now they have too much supply, not enough demand. Chicago does not have enough supply, has a high demand.

[C]

We're 26,000 units probably under supplies now.

[D]

I will say they don't report as much about in our, for Kenny and I, we, if we're doing ground up, which we're doing more of, we're talking like five story buildings. So these aren't even mid rises, they're smaller size buildings between 30 and 50 units, 30 and 60 units. And actually, I mean we know quite a few developers that are, are building these type of projects. And you know, I think clearly The Chicago rental market is probably the best rental market I've ever seen. And Kenny likes, Kenny can go through the stats because he likes them a lot. But, but it's not, it's tenant retention and then, and then, you know, like new product inflation, we'll call it, or increase in rents. And, and both of those are at the highest level we've ever seen. Our retention is the highest it's ever seen. Our renewal rates are higher than we've ever seen. And our new rentals are, are at a rental rate that it's the highest we've ever seen and have gone up

[C]

year, year over year years the last three years. Michael, talk numbers just to get people to think it's relevant. I mean, you're looking at people who stay with us. We project maybe 2, maybe 3% increases. We've averaged, you know, we have 68 retention this year with an average person staying at over 5%. And when we, we have to renew the lease or get a new tenant, it's over 8%. And those are numbers that we, we struggle to keep up with. Michael and I used to pride ourselves on saying, oh, we know what every unit rents for. I think it's gotten to a point where we're like, we're trying to catch up, you know. Our goal also isn't to price our tenants out of the market, you know, but the reality of it is you can't go move. If we raise you 5%, you can't go find a similar apartment for the same rent in the city.

[A]

How important is the location of the building, the location of the property, or do they rent? Well, in neighborhoods that aren't as nice too, but just at different rent levels. How important is location still in the rental market?

[D]

Well, I would say that again, our experiences and, and my brother and I have, historically, we all of our properties are located and kind of these premier north side locations. So let's just say from Lincoln Square to the, to, to Old Town to West Loop, we go into Humboldt, Logan. I mean, certainly the demand in those areas has remained very steady, if not increased. And so I don't, I don't want to like, talk out of turn. I don't know some of the other areas, I suspect that those are also renting. I believe the rental rates are lower. And I think it's important, like Kenny said, what we're finding is that if you're renting with us right now and you wanted to go get a similar place in a different location, maybe an equal location, you're not going to find you're going to be paying more rent in addition to moving costs. And so we find that people aren't leaving.

[A]

I'm going to ask you a question about family pride. One of the brothers is a physician leader. Does that get less or more credibility around the parents and family than being real estate developers and owners of real estate? Where does that fit in and how does that go?

[D]

Okay. And I don't want to bring down the mood of the whole panel, but both our parents are deceased.

[C]

Yeah.

[D]

But I will say that I think growing up my father was a doctor. So we, he was always like, we were just, you know.

[A]

You were the real estate guys.

[D]

Yeah, I mean like we were.

[A]

It's hilarious.

[D]

Was very impressive.

[A]

But as good a guy as they come, your brother as well. So I just was curious as to how that all went as you guys ended up in real estate and doing tremendously well. And is he ever jealous of your guys success or is he okay?

[C]

He does very well and I think

[D]

when he was a surgeon and practicing surgery he might have been a little bit. But he, I think he's, he's gotten very involved and excited about hospital administration which. So I don't, I don't quite, I don't get it. And he, I think, and now he, he, he participates in our deals now. So I think he gets to, he gets a little bit of excitement through

[A]

that, a little bit of both. And Rick, you've had this fascinating career. You carved out this incredible niche in the real estate business. Talk about what you do and how you got started in it and maybe a couple of the interesting things that you've dealt with in real estate.

[E]

Sure. Thanks, Scott. And for 38 years I've been in the real estate and personal property auction business all around the country and a little bit outside the country. And the clients have been wealthy people and people with financial problems and the heirs of people that have passed away. And bank of America and Chase and the FDIC and the US army, obviously. In Chicago, one of the sales that we did years ago that got a lot of publicity was for the US Postal Service. We auctioned the big old former Maine Chicago post office that the Eisenhower Expressway goes underneath. But all kinds of sellers find auctions beneficial. Sometimes it's because of the urgency, the time, the, the relative speed in which a sale might happen. Courts love auctions, for example, but so did divorcing couples, candidly, when the reason that the marriage had a problem was because of the house. And it's a good way to get rid of the house and figure out what it's worth. So it's been very valuable, especially when the asset is hard to value.

[A]

What are the most interesting auctions you see today? And what does somebody need an auction? I know during 2008, 2009, when there was the real estate crises or the Great Recession, you were so incredibly busy, you stayed busy all the way through. Do you do better in bad markets, good markets? I mean, you seem quite busy. What does that look like for you as an auctioneer? When do people come to you to auction off a property?

[E]

Well, it's funny, you ask if, if we were selling Monet's and Van Gogh or if you're the Merck or the Board of Trade or the New York Stock Exchange or the US Government refinancing the national debt every week at a Treasury auction. Auctions are the normal way that many businesses determine value and find value. But in real estate, the irony is that since the depression in the 1930s, real estate auctions have somewhat gotten a bad reputation. So to that end, in that 2007, 8, 9 period when real estate values were falling, which hasn't really happened in most of our lifetime, places like Las Vegas, homes were going down 10% a month in sometime in that 2007, 2008 period. So sellers like Fannie Mae and Wells Fargo and GMC bank, now called Ally bank, were calling us and saying, please auction these properties. We were running to Vegas and Detroit, which had a precipitous drop. The urgency there was they had to move the inventory because they were getting so much inventory coming in, they just couldn't handle it. However, these are relatively good times. It is a seller's market, as Paula was pointing out, and it's all about supply and demand. And right now, the supply is low in residential in most markets, which would be an excellent time for sellers to do an auction. But many sellers really can't get their arms around the fact of doing an auction. And because the stock market's at an all time high and they feel that their home is Maybe going up 1% a month, 12% a year, they don't really feel the urgency. And of course, what you talked about is very real. Many people got locked into mortgages at 2.65%, 3% interest, and they're looking at rates today at 6.5. So they are. People don't want to talk about it, but they're kind of prisoners to their home. They live in affluent areas all over this country. They look like millionaires. Maybe they are millionaires. But the reality is they're kind of prisoners because it's 6.5% interest on a current, on a new home and they're paying 3% now. They're sticking around.

[A]

They're not billion dollar house. It's 30,000 a year on a 2 million house at 60,000 a year just there just to move cost you that. Just to start with Paul, what are some of the most interesting issues that you're looking at in real estate right now? What do you see as some of those interesting issues that you see on

[B]

exactly what Rick was saying to his point that there these a lot of people refinance during the COVID time period or they purchased and then they bought. It was at you know, two and a half, 3% and they want to sell and, or they, they want to sell and they can't because they're, where are they going to go? Or they can't even refinance for sure. That's out. So where are they going to go and find somewhere else where they're going to pay two and a half percent. The rental prices right now are really high. So it is like a catch 22. It's, it's a little bit of a struggle. You know the wealthier people can seem to manage it because, or not even you know, middle class because maybe they have some funds saved up if it's worth it. They want to be closer to their grandchildren. So they're going to make the move, they're going to bite the bullet, they're going to take that hit and that's okay for them, but it's not okay for, I mean like let's talk about the Gen Z market. The younger kids that are doing everything right. You know, they're working, they, you know, they're, they're working hard. They got job, they have jobs, they're saving money and they're trying to buy and they just are kind of chasing this ideal of homeownership and that American dream, if you will. And I know that I have three Gen Z kids and they're, you know, my oldest one is 27, lives in Lincoln park, has to keep renting because to put down 20% or to get into a bidding war, right, and you know, you want to pay more than what it's worth. He's got to get a loan. They're not going to praise out. So the person who has the mortgage, I'm sorry, who doesn't have the mortgage, who has the cash, is willing to, you know, who care. They don't, they don't have that appraisal issue. So there's a lot of. There's some things at hand. It's not all doom and gloom, I promise.

[A]

But, but take a second because we see again more transactions again getting done. It seemed like a few months ago is really soft in the North Shore, in this area. Just because there's not enough houses to buy and. Exactly. We talked about 10 bids on a house and the parents show up and help the kid who's got, you know, the parents who have money, you know, they backstop the kid and then the kid's got a whole different game compared to other people that they're competing against. But talk about the Florida market. What do you see in the Florida market? Because you also spend time helping buyers and sellers there for a while that seemed to be just on fire. Is that still on fire? Is that softening? There's been so much building there. What do you see there?

[B]

So the Florida market has softened for sure. And we.

[E]

I.

[B]

This, this year we saw a lot of. On price reductions where that wasn't the case before. It was again this whole, it was this whole frenzy. People were coming to Florida, moving to Florida from, you know, the Midwest, New York and, and, and you know, the whole Covid issue, post Covid issue too. And then now it is the, the construction. They're still building a lot. But there was also a different issue in Florida because of this. You know, there's a lot of HOAs there and there was this issue with the HOA when the building collapsed in Miami. And then there's this whole reevaluation, reassessment now and all these special assessments coming up. So Florida has a whole different problem on its hands in terms of that. It's, it has slowed down. The prices are lots and lots of price reductions. I mean I. There, you know, homes selling for $75 million, which was like the norm truly two years ago. Our now, you know, they're at 50, 000 or. I'm sorry, 50 million. 50,000. 50 million. Or you know, then your normal bracket, you're in like, you know, the millions. But, but it's, it's a different market there than here. For sure. It's wild. It's like the wild wild west in Florida.

[A]

But you are seeing though more and more what people call price improvements. We call them price reductions, but people call it price improvements in the marketing and stuff like that. Kenny and Michael, the sort of movement towards. There's a question in the audience about the change in workforce, how workforce is less Focused on the big office buildings in the central cities. Does that make a difference in your business, in your locations? Like at one time, some of these buildings built near North, river north were built in part to help accommodate people that would be living and going to work and big buildings in the Loop and any changes that you see because of how the workforce now works, remote and hybrid and so forth. I see Dylan Warner's joined us, one of our sponsors, great leader Dylan. We'll ask you to go off camera for a few minutes and we'll be back with you on the next panel. Thank you so much, Dylan, Kenny and Michael, any thoughts on sort of workforce redistribution and what it means for the rental market?

[C]

Well, I mean, what we're finding is, and Michael can speak as well, I mean, you're talking about people working from home instead of going out to work in the Loop.

[D]

I mean, and just office, office product has changed, obviously.

[C]

Yeah, people are moving out of big office buildings, But. Go ahead, Michael.

[D]

Well, I think we've seen, yes, there's been a lot of change. I think one of them that comes to mind right away is that we're, we're actually buying some of these smaller office buildings and, and converting them into residential properties in areas like river north, for example, which is happening, you know, everywhere in river north they just, I think cranes or someone just posted an article about it the other day. And, and so not only are, are we seeing that some of these, that people aren't working in the Loop, they're converting everything in the Loop to residential. And I think from sort of on a more granular level, we're designing apartments today when we rehab properties to accommodate people who don't go into the office. And so, you know, when we're designing buildings, we realize that, you know, we, we have this joke in our business. When we walk through a building, for whatever reason, we have to bring someone through it. Insurance appraisal. Everyone's always home. I mean, I, when we, I, I think I could speak for most of us. I mean, I was never, never, I'm still never home. I mean, I, I wants home. We have to, you know, and then of course there's all the, you have to give them 48 hours notice and nobody wants you in their apartment because not just their home, but it's become their, their workplace. And so, yeah, I think there's been a big change. And, and I would say.

[C]

It also changes how we develop property. If you think about it, people are home all the time. I mean, they're in their building and in their unit. So we're now looking at adding amenities that we would never probably have done and smaller 36 unit buildings. Talking about adding rooftop decks or gyms in the basement or co working spaces in the basement. Stuff that we would never have done 20 years ago.

[E]

Well, and if I might, Ken and Michael, I'm sure this amenity. Everybody wants a package room because everybody gets their Amazon packages. You need a secure package room. And I know Paul wants to say something, but Scott, I think your listeners will get a real kick out of another asset class which I see about to change in a big way, our parking garages. As you know, I spent a lot of time in California and Los Angeles. Angeles and San Francisco. You look to your left, you look to your right, there is no one driving the automobiles that are driving next to you. So when you look at all the parking garages, especially in the central business districts of this country, I feel that those cars won't need to park in the garage because your car will let you off. It won't go park. It'll go out and make you money by picking up other people during the day if you so wanted to. And the parking garages and the apartment buildings themselves that have garages inside were not built to hold the electric cars which weigh three times more than the internal combustion engine cars. So there's going to be a lot of central business district real estate that's going to have to be well thought of. And even though Michael and Ken are doing it, a lot of the floor plates in the office buildings just don't lend themselves to conversion to residential. And therefore, like we used to see in Las Vegas when the old casino would get knocked down, some of these nice looking office buildings around the country are probably going to have to be torn down.

[B]

Yeah.

[E]

Crazy. Just crazy.

[C]

Rick.

[A]

Thank you. Paul. You were going to say something. You're going to have something.

[B]

I was going to say, I think you guys, Rick and Michael, I'm sorry, Michael and Ken, you guys should open up a couple cafes around Lincoln park because you know, again, I have three gen zers and there, if you're these kids are a lot of kids, not all of them, of course, but are in tech. And in tech you're working from home mostly. 70% of these kids are. My oldest son is always at the cafe and he says it's a cafe. Everybody's working there. They have their computers are able to tune out or they have their head, their earbuds on and they're just working and they're doing data analytics online and they're really working and they're really focused, but it is different. And my other son, who's in imagery and different, he has to go to the hospital. But that's a whole, you know, it's a different, it's not the tech. It's tech, but different, you know, where he has to be in person. But a lot of these kids graduated with computer science degrees or econ and such, and they love it. I mean, my son's perfectly happy going to the cafe every day and working for five hours.

[E]

But Paula, aren't we concerned that when these kids graduated with computer science degrees and they were told to go into coding about 10 years ago, are they all going to be unemployed? But thank goodness they will all have guaranteed income from the government. Isn't that the future?

[A]

Let me, let me ask a different question before we get into a whole different discussion down that route, let me ask you this question. I'll ask Rick, Kenny, Michael, Paula, this the most interesting thing you're watching in real estate right now. And Kenny and Michael, I'll start with you the most Rick had mentioned what's going to happen to these big parking lots. What's going to be these big commercial buildings, big office buildings, some of which can't be converted to, to residential, you know, and some of them still have pretty good vacancy rates, some don't. But, but Kenny, Michael, the most interesting thing you're you're watching in real estate right now. And then Paul ask you the same thing. And Rick, you too, Kenny and Michael.

[C]

Interesting thing I'm seeing in real estate,

[D]

I mean, I think the adaptive reuse from, from office, the resi is one of the most interesting things I'm seeing because it's not like, I mean, Kenny and I always say, like, we're never the first ones in, we're never the last ones in, but we get in relatively early. But as I'm looking at that space now, it's, I mean, we just came our afternoon has been insane because it always is. But we, we, during your panel, we ran to go look at an adaptive reuse building in Fulton Market. And it just and it's a beautiful office building, seven stories, timber, timber loft office. And it's essentially 50 vacant. I mean, Kenny was walking through this one office that was 100 vacant, had the nicest desks, a thousand chairs, and nobody was in there. And it's like to me, that that's kind of the most interesting thing that I've seen because we've been people are always Building ground up. People are always taking these neighborhood walk ups and rehabbing them and that's been going on for years. We've been in business.

[C]

What I think interesting and I maybe in the minority. I think people are looking at renting as more of an asset than buying. You said it's hard to buy the barrier to entry into owning real estate. It's extremely difficult. And there's nothing wrong with like renting. It gives you a freedom to fix anything. You can move when you want and I really do believe that that become more of an asset and not look, oh you don't own. No. I think renting actually opens a lot of doors and I think I couldn't

[A]

agree more with you, Kenny. There's a whole generation to be renting versus buying just because it gives them flexibility. They're paying maybe a premium a little bit, but not even as much anymore for that rent versus ownership. But they don't have all the risk of holding the property and so that

[D]

they can, they can move and move to a different state and work remotely so they're not down to a mortgage, to having to sell a home.

[A]

30 seconds on the cost of adaptive reuse. Adapting. You know, some of these, some are impossible, some are doable. How big a challenge is the cost? Or is that every building's different in terms of the ability to change it to residential?

[C]

You can speak directly to that and Michael and I can. We are doing a building right now that let's say we figured It'd be at 165 a foot. We'll be lucky if we, if we get it done for 200 a foot now. So I'm the divide between building new and these adaptive reuses is getting smaller and smaller which is why Mike and I have started to look at building ground up construction. That's you know, that's what we're.

[D]

Smaller size. Smaller size. I think we would, if anyone asked us today, we would say without question if somebody could find us land in a well located area, we would rather build a 5 story 50 unit building than rehab, than an adaptive reuse 50 unit project.

[A]

Just because so many different complications. Paula, let me turn to you. I gotta, I gotta wrap up this panel shortly. Paul, the most interesting thing that you're seeing currently

[B]

just, just that the market is starting to equalize a little bit, which is great. I love that because to what they were saying too is that talking to some of these younger folks or just people who are renting, they're not seeing it as a loss really. As if you talked to somebody five years ago, they're seeing it as bright. The flexibility gives them flexibility, give some options. They're not locked into something so they're turning it around and looking at the positive because they don't really have a choice to be honest. And so, and the rents aren't as high as they were too. So it's interesting, I think, you know by, by these office buildings can be converted, converted into multi use also which is good. It seems like a lot of the Gen Z's are really looking for, you know, they want, they want everything to be easy. They want it right there. So if you can build, you know, a coffee shop with this shop or that and have a few residentials above, you're in good shape fast.

[A]

And I mean I know that in the building downtown that one of the kids lives in, it's exactly that. They've got the goddess in the grocery

[B]

on the first floor that no problem because everybody, they like, they like the

[A]

easiness of it and the amenities. Rick, Rick, you're in a lot of different markets. You see a lot of different markets. 30 seconds on the most interesting thing you're watching right now.

[E]

Well, the most interesting thing I'm looking at is data centers and to that end is how are we going to get the power to power all these data centers and the need for water And a lot of municipalities don't want it and that directly affects Scott, our 401k and our IRA because a lot of our high flying stocks require these data centers and a lot of these municipalities are saying not in our town, don't build it. So really the energy infrastructure, we all take it for granted but I believe it's everything and it's going to be such a political fight and the is our electrical rates going to go up and I mean really go with that

[A]

with the phasing blackouts in California for a period of time and that's something our country is not used to and does not like. People don't like that not having their energy when they want to have it fasting. Kenny and Michael, I want to thank the both of you. Rick Levin as well and Paula, always fantastic to visit with you. The best in the business. Paula, thank you so much. Thank you folks.

[D]

You guys, thank you for having us. Thank you Scott, Paula and Rick, always

[A]

a lot of fun. Thank you for listening to the Becker business and the Becker Private Equity Business Leadership Summit. Again thank you to each of our sponsors. McGuire woods perpetuate capital, Thinkspan Priority Search Management, Range Park Partners, Bearden Warner and Elevate Talent Advisors. Thank you very much.