As the current residential real estate market drops toward record lows its nonresidential partner is trending downward as well, yet some signs point to an increase in development for 2008.

“Nonresidential construction employment eked out a small gain in January, implying that the spending rise of 2007 will continue,” said Ken Simonson, chief economist for The Associated General Contractors of America. “A 3.5 percent jump in employment of architect and engineers since January 2007 also suggests that nonresidential will remain positive.”

While the country’s overall outlook may look promising, the suburban Chicago reality is that “there aren’t really a lot of cranes in the air,” a term used by John Coleman, senior vice president of The Alter Group, a corporate real estate development company in Skokie, to indicate the presence of development.

“There’s just not a terrific amount of tenant demand right now for more space and there is still a significant amount of inventory that exists.”

To understand this trend one must recognize the residential market as the catalyst for all others.

“It all starts with the housing,” said Rich Turasky, owner of Elgin-based Capital Realty and Development and Capital Lending Group. “Then the retailers, then the industrial guys and the office guys. So there’s definitely an impact. In industrial, we’ve not seen as great of an impact. Historically it’s just the last (market) to feel the brunt of what’s going on.”

Unfortunately, the office sector is starting to take on much of that load.

“Throughout suburban Chicago we’re looking right now at about a 15-17 percent vacancy rate depending on which community you’re in, which is probably 3 percentage points higher than an otherwise acceptable number for a healthy market,” said Coleman.

One sector that is trending sharply upward is banks. In the west suburbs alone, dozens of bank sites are currently being developed.

The retail market has also stood firm, especially in Will and DuPage counties.

“You’ve got a good amount of retail that continues to be developed,” said Coleman. “Both regional and super regional retail centers are going up in the Bolingbrook, Joliet, Plainfield and southern Naperville markets.”

One trend in retail that has been developing over the past few years is called lifestyle centers, which are high-end, outdoor shopping venues. The maze of escalators in conventional shopping centers is replaced by a city-like grid of streets and sidewalks in such centers. They are open-air venues, normally devoid of an anchor store, with the look and feel of a small village.

“It’s multi-use,” said Coleman. “You’ve got big box retail there, small boutiques, inline stores (one after the other), and then you’ve got outbuildings with restaurants and other little boutique stores in it, along with some office and some public service.

“It’s like a whole lifestyle choice that you make, versus the traditional Jewel Osco, Target and Home Depot centers or the enclosed mall.”

One such center is the Promenade in Bolingbrook, which opened in April 2007.

Lifestyle centers will soon be branching out into the medical sector.

“You’ll have a medical office building and an immediate care facility, dentistry and ophthalmology, all clustered in kind of a medical-mall thing,” said Coleman. “That’s a trend that is starting to play out and it’ll certainly play out here in the Chicago metro area.

“Anything that plays will play here.”

A once-popular trend that has nearly dropped off the real estate landscape is build-to-suit developments. In this scenario, a building is constructed to meet the design, location and physical specifications of one major user.

“When you talk about buying land and building a building-to-suit, it’s a two-year process. Most people don’t have the ability to look two three years into the future,” said Turasky. “And since so many of the developers try to control the site, they only make money if they build it and sell it to you or build it and lease it to you. They don’t typically allow users to come in and buy land specs.”

Coleman offered an option tied to big-box stores.

“Where you will see build-to-suit continue is in the real big box scenario,” he said. “IKEA might decide to do another store somewhere and those are pretty significant projects when they do that.”

Most developers see the I-355 extension to I-80 as the impetus for future development, yet the jury is still out on exactly what kind of development the new tollway will engender.

“Certainly it’s a whole new frontier,” said Coleman. “You drive up and down it and all you see is open space and farm land. That was the way (the northern extension of) 355 was back in the 1980s. Now, of course, every square-inch has been consumed and we have to presume that’ll happen down there too.”

Expansion in that area won’t come without its obstacles, though.

“The I-355 expansion has been talked about for probably ten years,” said Turasky. “There were a lot of land speculators that ran down along where that extension was going to go and gobbled up a bunch of real estate and have been holding it.

“At the end of the day, with construction costs going up and borrowing expectations getting more challenging, some of that premium pricing which they were hoping to get makes it a real challenge to go ahead and launch development.”