From Boom to Bubble: How Finance Built the New Chicago

by Rachel Weber

An unprecedented historical, sociological, and geographic look at how property markets change and fail—and how that affects cities.

In From Boom to Bubble , Rachel Weber debunks the idea that booms occur only when cities are growing and innovating. Instead, she argues, even in cities experiencing employment and population decline, developers rush to erect new office towers and apartment buildings when they have financial incentives to do so. Focusing on the main causes of overbuilding during the early 2000s, Weber documents the case of Chicago’s “Millennial Boom,” showing that the Loop’s expansion was a response to global and local pressures to produce new assets. An influx of cheap cash, made available through the use of complex financial instruments, helped transform what started as a boom grounded in modest occupant demand into a speculative bubble, where pricing and supply had only tenuous connections to the market. From Boom to Bubble is an innovative look at how property markets change and fail—and how that affects cities.

Genres: Urban Planning, Finance, Urban, Cities

296 pages, Hardcover

First published November 16, 2015

Reviews

[Gary · Rating 4 out of 5]

An interesting dissection of the interplay between financial institutions, developers, brokers, and governments in guiding demand toward new real estate - often at the expense of the old. Weber examines these issues at a national level before homing in on the particular events that transpired during Downtown Chicago's "Millennial Boom" from 1998-2008. She argues that tepid economic and demographic fundamentals (Chicago's population and employment growth during this period were both flat) were largely overlooked as lenders chasing originations and developers flush with capital threw up dozens of skyscrapers over the course of a decade, primarily in the West Loop. Rather than a demand-led boom, this new wave of development was symptomatic of a bubble, with older Class A and lower Class B-C buildings suffering as the downtown office market essentially became a game of "musical chairs": tenants traded space in buildings constructed during prior development booms in the '60s and '80s for ritzy Wacker Drive office towers, leaving behind empty spaces which remained vacant as the city failed to attract firms from elsewhere. Additionally, Weber cites specific instruments and policies as having engineered this trend - including the financialization of real estate and prevalence of CMBS enabling previously unheard-of amounts of acquisition leverage, tax-increment financing (TIF) designations in large parts of the Central and East Loop submarkets which allocated the incremental taxes from higher property values to development, and financial incentives provided to companies within Chicago to prevent them from leaving the city. Real estate brokers and appraisers also make repeated appearances in Weber's write-up harping on the "obsolescence" of slightly older buildings and playing a heavy-handed role in guiding clients toward buildings of the newest, sleekest vintage.

Although I found some sections a bit hard to parse through (I had to skip over a bit of the discussion of various financial instruments), this book was definitely a thought-provoking read and challenged some of my own ideas about growth. One takeaway being that now in 2024, with commercial real estate vacancies at record highs across the country, Chicago's civic boosters should be content that there is not a frenzy of overbuilding here as in other cities, which would surely exacerbate the existing vacancy problem and prolong the century-long problem of rendering older Loop buildings outdated and pushing them to the chopping block.

[Sean · Rating 5 out of 5]

This is the sleeper bombshell analysis that the Left has been lacking. Crucial to understanding the concrete dynamics of the rise of the "Real Estate State" as Sam Stein calls it, but written with more depth and empirical evidence. For anyone trying to grasp Chicago's contemporary political economy, rather than a mythological image derived from yesteryear, this is the book. My copy has notes on every page!

[Kaylee · Rating 4 out of 5]

A book about business that uses "leverage" in the pre-2010 startup way! Amazing.

It's also incredible that the entire premise is "in real estate, supply and demand do not work in tandem the way your high school econ class told you they do". It's still crazy to me how some small people can create rules that affect literally everyone, including going with the Field of Dreams adage instead of the free market "rules". The pull quotes she included were terrifying. How American of most of those people to just act like, "it wasn't my long-term problem, and I got what I wanted out of it [money]".

A fast read this is not. But it's detailed and fascinating, and has a ton of solid examples proving what my outsider analysis had seen -- that there were very few new businesses moving into all that new construction in downtown Chicago (and, NYC, too -- I spent a fair amount of time there during the boom/bubble period). I'm actually interested in reading more about the current set up of Australia and Sweden, and thought the last chapter and epilogue were just a little too curt -- explain more about what it would take to get to a better-protected system rather than a paragraph or two about some of the options and reasons to support a change. (Or, if that's not her expertise, direct the readers elsewhere?) And I would LOVE to know what Weber thinks about the office building if-you-build-it-they-will-come mentality now that it's 2022 and WFH is such a draw for so many people.

On a personal enjoyment level, this is solidly a 3 star situation. But that's on me - while I have a math (accounting) brain, I fucking loathe corp finance talk.

[Sara · Rating 4 out of 5]

This investigation of the millennial boom in Chicago's commercial real estate market provides a detailed in depth analysis of the narrative put forward by the boosters and the beneficiaries of the boom and subsequent bubble as well as the ways in which finance, speculation, and public financial support worked together to sustain overbuilding in the Loop. The detail and thoroughness with which Weber describes the dynamics of the bubble were thought-provoking for me, showing the ways in which finance, real estate brokers, and developers have created ways to extract wealth from cities with little regard for what is left in the wake. I thought this book did a better job of showing the impacts of FIRE industries on cities than the similarly themed Capital City, although Weber's policy solutions long-term vision were quite different from Stein's.

[Ajk · Rating 4 out of 5]

A really valuable resource on Chicago, the midwest and also construction/development finance in general. It's very readable for an educational book and incredibly thorough without being polemical.

This was a great book, that I could only really see improved with any sort of case studies/illustrations. Even the book's more prescriptive chapters near the end were understanding of the trickiness of dealing with urban finance.

[Adam · Rating 5 out of 5]

Brilliant! Read my interview with the author about her book in Jacobin: https://www.jacobinmag.com/2019/10/re...