The annual meeting of the Springfield Sangamon Growth Alliance, held Jan. 23, touted eight notable projects in the area. Highlights included plans for an Amazon distribution center at the intersection of Bissell Road and North Dirksen Parkway, a Frito-Lay warehouse at the south end of town and the Scheels Sports Park at Legacy Pointe that is slated to open this year. While area commercial lenders are optimistic about the development these new construction projects will bring, there's a wait-and see attitude regarding the Trump administration and the impact it will have on business.
Tom Kissel, senior vice president at Bank of Springfield, said he is hopeful other companies that require larger commercial properties and rely on highway distribution will consider Springfield now that Frito-Lay and Amazon have chosen to locate new logistics centers here.
Kissel also remarked that Scheels Sports Park at Legacy Pointe could be "a game-changer" for the area. Parents travel for athletic events and typically where there are crowds, there's also the need for convenience businesses such as restaurants and gas stations that cater to that volume of traffic. "We are anxious to see how that development evolves," he said.
Sports and tourism go hand in hand. Kevin Schultz, senior vice president, Hickory Point Bank, said, "I don't think we fully understand the impact of the sports facility yet. If it is as successful as it is hoped to be, we could see many new restaurants and such, because business feeds on itself."
Overall, Schultz said commercial real estate is steady. He said leasing is picking up, as evidenced by fewer vacancies, and he believes this could improve further with the new Trump administration. Trump has a return-to-work philosophy that may encourage employers to bring employees back to the office, which would improve office vacancy rates as companies lease more space.
"Return-to-work is a good thing for commercial real estate," Schultz said.
Kissel agreed that companies may be moving back to pre-pandemic trends of having people work together in a physical office.
"The office occupancy rate in the Springfield area is strong – in the mid-90% rate – which is driven by the state of Illinois," he said. "The private sector may not be as strong, but getting people under the same roof makes sense."
However, when it comes to retail, the market does not seem to be rebounding. Kissel said so many people shop online these days that the retail sector hasn't been growing. And with Macy's closing its Springfield store – the last traditional anchor at White Oaks Mall – it will open up space for more offices or another retail tenant.
"Will new stores be content with the current space, or will it be worth adding new technology features to the existing retail space? It takes serious capital and energy if it is to be successful," Kissel said.
Schultz said, "We don't go to the mall like we used to," and noted that many malls are being repurposed, as we've witnessed locally. After Bergner's and Sears both closed in 2018, family entertainment center Malibu Jack's backfilled the former Bergner's space, and the state of Illinois purchased the vacant Sears building. Employees from the Illinois Environmental Protection Agency began moving in this month.
Of the lenders interviewed, none were aware of plans to build new multifamily units in 2025. Corky Joyner, president of Joyner Construction Services, has announced plans to build 250 additional apartments on the west side but previously told SBJ he doesn't anticipate breaking ground until 2026. Joyner has received zoning approval for land in the 3100-3200 blocks of Mercantile Drive, just south of AMC Showplace 12.
"The demand for newer apartments continues to be strong; occupancy levels are pretty high in the area. People like the new complexes with pools and weight rooms," Schultz said.
In addition to a strong market for rental housing, there is also a demand to lease commercial space. Between material costs and interest rates, new construction is cost-prohibitive for many small businesses.
"The costs of construction are so high that it makes sense to lease," said Schultz. "The cost of labor and raw materials is high, as well as copper for pipes, which skyrocketed after the pandemic and hasn't come down."
Erickson added, "Financing costs have remained elevated, so there are challenges for new businesses. Interest rates will probably stay close to where they are."
Kissel said there is uncertainty as to how the new administration will influence interest rates and the impact it will have on the market, although "Trump is usually pro-business."
"I think there will be opportunities for growth," he said. "But even in the best of times, some businesses will go bankrupt. It's never all one way, because no matter how things look today, the environment always changes."