Coming out of the recession, Chicago has been one of the slowest housing markets to recover. For more than a generation, Chicago was a 20,000- to 30,000-permit market. Despite a metro region with about 9.9 million people, builders only pulled 15,745 permits last year in the Windy City and its suburbs.
“Chicago is adding white collar jobs at rates similar to [the] Carolinas,” says Alan Laing, CEO of Orleans Homes, which rebuilt its lot inventory and is selling seven communities in the market. “But the overall conditions are still not great.”
That less-than-stellar new home climate explains the public builders’ tepid approach to the market. But as the big guys have sat on the sidelines, local builders are getting more aggressive. Take The Jacobs Companies. The builder recently announced that it has opened five new communities in Chicago's North Shore communities. That’s no surprise since Jacobs has been working in that market for 80 years.
“It’s very difficult to break into the North Shore area, just because of the zoning technicalities,” says Keith Jacobs, CEO of The Jacobs Companies, based in Deerfield, Ill. “A lot of other companies don’t want to have to go through it. We’re used to it.”
Before Keith Jacobs was at the helm, his grandfather, father, and uncle led the company. And, his daughter, Taylor, even helps out when she’s back from college. Throughout those four generations, the company has built all around the Chicago region.
“We’ve developed from the tip of Chicago north to the Wisconsin line, west to Barrington, and east to Lake Shore,” Jacobs says.
With 80 years in the business, Jacobs has weathered a lot of recessions. The last one represented major challenges though. The company survived by “buying and developing at the right pricing,” according to Jacobs.
“There wasn’t a lot of inventory and competitors in the market,” Jacobs says. “We were putting product out from the $500,000 to $700,000 range. That same home today, you can’t touch for under $1.1 million. We were able to bring really good value.”
Part of the way Jacobs creates value is its work with municipalities in the Chicago area and part of it comes from its local connections, which allows it to secure land. Jacobs’ current crop of five projects were secured from five different owners during the past year.
“Some of them came from lenders,” Jacobs says. “Some come from just the property owner themselves.”
Local municipalities will also point Jacobs in the direction of dirt. “We get a lot of our recommendations from the municipalities themselves,” Jacobs says.
And the municipalities will play a role in product selection. For instance, at its single-family development in Highland Park, the local government was looking for an empty nester product. On the other hand, scarcity drove an entry-level, townhome development in Deerfield and a townhome and row home development in Northbrook, Ill.
“Highland Park is downsizing and Northbrook is move up,” Jacobs says. “Deerfield is step down for empty nesters.”
After this round of developments, Jacobs has five more projects in the pipeline and is mulling four others. As its developments pick up, its closings should as well. After hitting 30 closings last year, the builder is aiming for 50 in 2015 on its way to breaking the 100-homes barrier in the future.
With its niche in the market, there’s no reason to doubt Jacobs. “The publics go further out where there’s more land,” Jacobs says. “A couple of them have tried to break into the North Shore area where we are, with no success.”