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Author: Mark Ainely | Partner GC Realty & Development & Co-Host Straight Up Chicago Investor Podcast
Every year, there’s no shortage of bold predictions about what’s coming next in real estate. Most of them are noise. But when experienced brokers and investors who are actively operating in Chicago take the time to review what actually happened, and what’s realistically ahead, that’s when the conversation becomes valuable.
In this episode of the Straight Up Chicago Investor Podcast, Mark and Tom are joined once again by Jake Fugman and Michael Scanlon of The Axon Group to break down their 2025 predictions, assess what played out on the ground, and share a practical outlook for Chicago real estate in 2026.
This episode isn’t theory or hindsight bias. It’s insight from professionals who are still buying, selling, financing, and advising investors in one of the most regulated and nuanced markets in the country.
Why 2026 Is a Defining Year for Chicago Real Estate
Chicago continues to operate under a unique mix of pressure points. Inventory remains historically low. Regulatory complexity is increasing. Office vacancy continues to weigh on tax bases. Interest rates have stabilized higher than many hoped.
Yet transactions are still happening.
The difference is that successful investors and property managers are no longer waiting for conditions to improve, they’re adapting to structural shifts in financing, zoning, and consumer behavior. This episode breaks down those shifts clearly and honestly.
100% Bonus Depreciation Is Back on the Table
One of the most impactful changes heading into 2026 is the return of 100% bonus depreciation.
Michael explains how cost segregation allows investors to accelerate depreciation into year one, creating significant tax offsets. While this strategy isn’t universal, it can be extremely powerful for real estate professionals and certain short-term rental operators.
The broader takeaway is simple: tax strategy has once again become a competitive advantage. Investors who understand how depreciation interacts with income, timing, and portfolio structure will have a meaningful edge.
Chicago Office Vacancy Is Getting Worse, Not Better
One of last year’s predictions did not materialize: a meaningful recovery in Chicago’s office market.
While some mid-sized cities have seen partial rebounds, Chicago has moved in the opposite direction. Office vacancy has climbed from roughly 22% to nearly 26%, placing it among the weakest major markets nationally.
Why this matters for landlords is straightforward. When commercial properties lose value, the tax burden doesn’t disappear, it often shifts toward residential property owners. This reinforces the importance of conservative underwriting and awareness of municipal budget decisions.
The Northwest Side Preservation Ordinance: Unintended Consequences
The Northwest Side Preservation Ordinance was expected to slow multifamily activity, and that prediction proved partially correct.
Two-to-four-unit sales declined, five-plus unit transactions dropped sharply, and inventory tightened even further. But the most important takeaway wasn’t pricing, it was behavior.
Jake and Michael share a real transaction where a tenant exercised their right of first refusal not to purchase the property, but to delay the sale and extend a period of below-market rent. This type of leverage doesn’t show up in public statistics, but it has very real transactional consequences.
For investors, sellers, and property managers, this highlights how policy friction can suppress activity even without dramatic headline price changes.
Downtown Chicago Is Stabilizing, Slowly
Another 2025 prediction that largely played out was modest improvement downtown.
Sales volume in the Loop increased year over year, and pricing rose slightly. While neighborhoods like Wicker Park and Bucktown continue to outperform, downtown still offers relative value compared to pre-2019 pricing.
For long-term investors, proximity to transit, employment, and infrastructure remains a meaningful factor, even if the recovery is gradual.
The 1901 Project Is Moving Forward
The long-discussed 1901 Project on the Near West Side officially cleared major zoning hurdles in 2025. While visible construction remains limited, approvals are in place for a music venue, boutique hotel, public plaza, and supporting infrastructure.
From an investment standpoint, the message is caution. Much of the anticipated upside is already priced in. This is a long-term play tied to westward expansion and infrastructure, not short-term speculation.
Mortgage Innovation Is Likely in 2026
One of the most important forward-looking discussions centers on affordability and mobility.
Michael outlines three potential changes that could unlock inventory:
• Portable mortgages that allow buyers to move existing low-rate loans
• 40- or 50-year amortization terms to reduce monthly payments
• Expanded assumable loans beyond FHA and VA
Each option attempts to address the same issue: homeowners feel trapped by low interest rates and high prices. While none are perfect solutions, even one could meaningfully increase transaction volume.
The group agrees that expanded assumable loans may be the most immediately practical option, especially when paired with gap financing tools.
ADU Expansion Won’t Be a Silver Bullet
Chicago’s ADU pilot program expands citywide in 2026, allowing accessory dwelling units by right in more areas.
While this is directionally positive for density, the panel is realistic about its limits. Construction costs, contractor restrictions, financing rules, and appraisal treatment remain barriers.
For most investors, ADUs will remain viable primarily in high-rent, A-class neighborhoods. This change helps developers and professional operators more than casual house hackers.
Interest Rates Are Likely to Stay Where They Are
After predicting rate declines in prior years, Michael reverses course.
Mortgage rates follow the 10-year Treasury, not the Fed funds rate, and persistent federal deficits are keeping long-term yields elevated. The expectation for 2026 is stability, not a dramatic drop.
For investors, this reinforces the need to operate under normalized rates rather than waiting for a rescue from the bond market.
Brokerage Consolidation and Google’s Role
The episode closes with a discussion on consolidation and technology.
Moves like Rocket Mortgage acquiring Redfin and Compass merging with Anywhere reflect a shift toward vertically integrated platforms. At the same time, Google has begun testing direct home listings in select markets, including Chicago.
The implication is clear: discovery is changing. Agents and brokers will need to differentiate through expertise, execution, and trust, not just access to listings or SEO.
Questions We Answer in This Episode
Q: Is bonus depreciation still relevant in 2026?
Yes, especially for qualified investors using cost segregation.
Q: Has the Northwest Side Preservation Ordinance helped tenants buy buildings?
No confirmed purchases yet, but it has delayed transactions.
Q: Will rates drop meaningfully this year?
Unlikely. Expect stability rather than sharp declines.
Q: Will ADUs lower rents in Chicago?
Not in the short term.
Q: How will Google affect real estate search?
It will likely reshape the top of the funnel and reduce reliance on traditional portals.
Key Takeaways for Chicago Investors and Property Managers
• Normalized rates demand disciplined underwriting
• Regulation continues to affect transaction velocity
• Tax strategy remains a competitive advantage
• Liquidity and flexibility matter more than ever
• Trusted advisors outperform generic service providers
Guest Information
Guests:
Jake Fugman
Michael Scanlon
Team: The Axon Group
Website: The Axon Group
Email:
Because finding good tenants and property management shouldn’t feel like online dating.
Dear Investor,
If you are an investor in either the city or suburbs of Chicago, I would love to speak with you about how we can help you on your real estate journey. At GC Realty & Development LLC, we help hundreds of Chicagoland real estate owners and brokers each year manage their assets with both full service property management and tenant placement services.
We understand that every investor’s goals are unique, and we love learning about each client’s individual needs. If there is an opportunity to help you buy back your time by managing your rental property or finding quality tenants, please check us out.
Best Investing,
Founder, Partner, Podcast Co-Host, and Investor
