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The commercial real estate industry has been navigating a turbulent permitting environment since 2020. The COVID-19 pandemic caused widespread municipal office closures, regulatory bottlenecks, and economic uncertainty, delaying projects and increasing costs. Now, as we move through 2025, the question remains: Have these permitting woes finally ended, or are developers, occupiers, and landlords still facing significant obstacles?

The ç: Illinois, Wisconsin, and Indiana

Illinois: A Market Struggling to Catch Up

Illinois has faced some of the most severe permitting delays in the country. According to Up for Growth, Illinois had 113,000 fewer housing units than needed in 2021 alone, a direct result of regulatory backlogs and permitting inefficiencies. The state ranks among the lowest for new housing unit approvals, exacerbating affordability issues and slowing commercial development.

• Chicago’s Challenges: Among the top 10 most populous U.S. cities, Chicago ranks last in average new housing units approved per capita over the past five years. In 2023, the city approved only 3,600 units—the lowest number since its peak in 2016.
• Economic Impact: A sluggish permitting process has slowed commercial development, limiting developers’ ability to respond to market demand quickly.
• Office and Industrial Space: Office permitting has been particularly slow, contributing to an oversupply of outdated spaces that cannot be repositioned efficiently. Meanwhile, industrial space demand continues to rise, but permitting bottlenecks have slowed the construction of much-needed logistics and warehouse facilities.

Indiana: Leading the Region in Permitting Growth

In contrast to Illinois, Indiana has seen significant growth in permitting activity.

• Permit Growth: The construction industry in Indiana experienced a 23% increase in permit approvals in the first half of 2024 compared to the previous year.
• Single-Family Housing Permits: Indiana issued 1,921 single-family permits in June 2024, a 16% increase from the previous month and 12% higher than in June 2023.
• Office and Industrial Space: Indiana has successfully streamlined its permitting process, leading to a surge in new industrial parks and office developments in secondary markets. Demand for last-mile distribution centers has fueled industrial growth, while office spaces in cities like Indianapolis have seen adaptive reuse projects facilitated by quicker approvals.
• Streamlined Approval Processes: Indiana has actively reduced permitting bureaucracy, leading to a more developer-friendly environment.

Wisconsin: A Market with Mixed Results

Wisconsin falls somewhere between Illinois and Indiana. While the state has seen some improvements, particularly in Madison, where permitting rates have been higher than the national average, certain municipalities still experience significant delays.

• Madison’s Permitting Boom: In the first half of 2024, Madison issued 2,152 multifamily permits, equating to 3.1 permits per 1,000 residents, far exceeding the national median.
• Office and Industrial Space: While Milwaukee has made strides in revitalizing office spaces through adaptive reuse, industrial developers continue to face zoning and approval challenges. The demand for industrial space is high, but permitting timelines still lag behind Indiana.
• Other Cities Lagging: Milwaukee and other major Wisconsin cities still face permitting challenges due to regulatory red tape and workforce shortages in municipal offices.

What It Means for Developers

For developers, the permitting process can make or break a project’s feasibility. The delays seen in Illinois have caused project costs to rise due to:

• Extended Carrying Costs: The longer it takes to obtain permits, the more developers must pay in holding costs for land and financing.
• Regulatory Uncertainty: Illinois’s strict regulations create unpredictable project timelines, making it difficult for developers to plan future investments.
• Better Alternatives Elsewhere: Many developers are shifting their focus to Indiana, where the permitting process is faster and costs are lower.
• Office and Industrial Impact: Developers looking to convert outdated office properties into mixed-use or residential projects in Illinois have struggled with prolonged permitting, while industrial developers in Wisconsin have had to navigate inconsistent zoning rules.

What It Means for Occupiers

Occupiers—tenants looking for commercial space—are directly affected by slow permitting processes:

• Limited Supply: A lack of new development in Illinois means fewer high-quality office and industrial spaces are available, driving up rental costs.
• Market Imbalance: Wisconsin and Indiana are seeing stronger development trends, attracting businesses looking for easier permitting and lower costs.
• Delayed Build-Outs: Even after signing leases, tenants often face months-long delays before their spaces can be occupied due to slow municipal approvals for interior renovations.
• Office vs. Industrial Challenges: Office tenants in Illinois face limited modernized spaces due to slow redevelopment approvals, while industrial occupiers struggle with supply chain disruptions caused by a lack of new logistics facilities.

What It Means for Landlords

For landlords, permitting inefficiencies can create additional financial pressures:

• Higher Vacancy Rates: Existing landlords may benefit from increased demand in the short term if new developments are stalled. However, in the long run, slow permitting can stifle business growth and economic activity.
• Uncertainty for Property Improvements: Renovations and tenant improvements require permits, and delays mean longer turnaround times for upgrading commercial properties.
• Competitive Disadvantage: States like Indiana, where permitting is more efficient, are attracting tenants and investors that might have otherwise chosen Illinois or Wisconsin.
• Office and Industrial Market Impact: Landlords in Chicago’s struggling office sector are unable to quickly reposition buildings for new uses due to permitting delays, while industrial landlords in Wisconsin have an edge if they can navigate the process faster than competitors.

Are the Woes Finally Over?

The answer depends on the region:

• Illinois: No. The state’s permitting backlog remains a major issue for commercial real estate, with no clear solution in sight.
• Indiana: Largely, yes. The state’s permitting processes have improved, making it a more attractive destination for developers and businesses.
• Wisconsin: Mixed. While Madison has been an outlier in efficiency, other parts of the state continue to struggle with permitting challenges.

Staying informed about local permitting trends is critical for developers, occupiers, and landlords. As market conditions shift, those who understand how to navigate the permitting process in their respective states will be best positioned for success.