From Boom To BubbleHow Finance Built the New Chicago

From Boom To BubbleHow Finance Built the New Chicago

Rachel Weber

Print publication date: 2016

ISBN: 9780226294483

Publisher: University of Chicago Press

Abstract

This book unpacks the urban development process, identifying the players and processes that contribute to periodic construction booms. Debunking the notion that booms occur to accommodate growth or are propelled by a natural process of creative destruction, it develops novel theories about how real estate markets are “performed” through historically and locally-specific professional practices. The book focuses on three main causes of overbuilding in commercial real estate: financial instruments and regulatory changes that boost liquidity in global capital markets; the practices of local intermediaries that help construct demand for new assets; and local government policies that provide incentives for development while simultaneously removing the detritus from earlier waves of expansion. To illustrate the interplay between these dynamics, the book documents the case of Chicago's downtown during the “Millennial Boom,” roughly 1998 through 2008. Relying on market data and interviews, it shows how the city's recovery from the recession of the early 2000s was a relatively jobless one and did not upend the secular trend of population loss. Moreover, modest innovations in building technology did not suddenly afflict older buildings with a case of mass obsolescence. This period of frenzied commercial construction was instead a response to the availability of public and private finance validated by the brokered and subsidized preferences of existing occupants for more modern premises. The book ends with policy proposals to slow capital circulation and alter the professional practices associated with speculative overbuilding.