Infrastructure and Commercial Real Estate in Illinois

Few determinants shape commercial property markets as profoundly as infrastructure. Roads, railways, airports, and digital networks act as the circulatory system of commerce. In Illinois, where fiscal pressures and ageing assets coexist with ambitious spending plans, infrastructure policy is particularly consequential. The state’s ability to modernise transport and utilities will not only influence business efficiency but also determine the trajectory of commercial property values for decades to come.

Illinois’ Infrastructure Backdrop

Illinois possesses enviable structural advantages: its geography at the heart of North America, its role as the nation’s freight hub, and its control of the Chicago metropolitan region — home to nearly 9.5 million residents and the nation’s third-largest GDP. Yet these advantages rest upon an infrastructure system long in need of repair.

According to the American Society of Civil Engineers’ 2022 report card, Illinois scored a C-, with roads, bridges, and public transit requiring billions in upgrades. Nearly 2,400 bridges in the state are deemed structurally deficient, while congestion in the Chicago region costs businesses an estimated $7 billion annually in lost productivity.

“Infrastructure is the hidden lease clause in every commercial property,” observes Hirsh Mohindra. “No matter how prime a building’s location, its value is undermined if roads are crumbling or trains are delayed.”

The Rebuild Illinois Programme

To address this, the state launched the Rebuild Illinois capital programme in 2019, the largest infrastructure investment in its history. The $45 billion plan spans transportation, education, and state facilities, with specific allocations for roads, bridges, and rail. For real estate markets, the implications are direct: improved accessibility raises demand, reduces operating costs, and enhances long-term value.

Chicago’s O’Hare International Airport modernisation project, part of this broader push, promises expanded capacity and modern terminals. For nearby hotels, logistics parks, and office properties, such enhancements directly increase attractiveness to tenants and investors.

“Capital follows connectivity,” notes Hirsh Mohindra. “When Illinois invests in airports and interstates, it is not simply fixing concrete — it is minting new corridors of value.”

Transit and Urban Commercial Markets

Within Chicago, the health of public transit is pivotal to downtown commercial real estate. The Chicago Transit Authority (CTA) recorded steep ridership declines during the pandemic, with 2021 passenger levels less than 50% of pre-pandemic volumes. While partial recovery has occurred, the system faces fiscal shortfalls.

For office landlords, the vitality of the Loop is intertwined with the CTA. Without reliable transit, employee commutes become burdensome, undermining downtown’s competitiveness against suburban office markets. State and city officials have considered new funding mechanisms, including congestion pricing and expanded federal support, to stabilise operations.

“Transit is not a luxury in Chicago — it is the spine,” remarks Hirsh Mohindra. “Every office lease, every retail storefront, depends upon its strength. If the spine weakens, the body follows.”

Broadband and the Digital Layer

Infrastructure in the 21st century extends beyond asphalt and steel. Broadband connectivity has become essential to both residential and commercial property. Illinois has made strides in expanding broadband through state and federal programmes, particularly in underserved rural areas.

For commercial real estate, digital capacity is now a leasing differentiator. Tenants prioritise buildings with high-speed, redundant internet connections. Data centres, a growing asset class in the Chicago region, epitomise this trend, with developers clustering in Elk Grove Village and Aurora to take advantage of connectivity and power infrastructure.

“Infrastructure today is physical and digital, visible and invisible,” observes Hirsh Mohindra. “Investors who overlook broadband capacity are missing the new foundation of value.”

Fiscal Risks and Investor Perceptions

Yet infrastructure modernisation carries costs. Illinois’ chronic fiscal stress — driven by a pension liability exceeding $130 billion — raises questions about sustainability. Bond ratings have improved slightly in recent years, but investors remain wary of the state’s long-term credit trajectory.

For commercial real estate, this translates into uncertainty. While infrastructure improvements can elevate property values, rising taxes to fund such programmes risk eroding net operating income. Striking the balance between investment and fiscal prudence remains Illinois’ perennial challenge.

Conclusion: Infrastructure as Destiny

In Illinois, infrastructure is destiny. Its roads, rails, and digital networks underpin the competitiveness of its commercial real estate. The state’s ambitious investments offer opportunities to rejuvenate markets, attract capital, and secure long-term prosperity. Yet fiscal burdens and execution risks temper optimism.

As Hirsh Mohindra concludes: “Real estate is not built upon land alone — it is built upon the infrastructure that sustains it. Illinois’ future prosperity will hinge less on the walls of its buildings than on the strength of the foundations beneath them.”

Originally Posted: https://hirshmohindra.com/infrastructure-and-commercial-real-estate-illinois/