Why Real Estate Investors Shouldn’t Ignore Chicago

A recent Crain’s Chicago Business article, titled Real estate investors to Chicago: We’re just not that into you, portrays Chicago as prosaic and less appealing to investors than it was last year. The city ranked 42nd in the annual Emerging Trends in Real Estate list by PwC and the Urban Land Institute. It’s important to note that the 2017 report listed Chicago at number 19 for U.S. Markets to Watch: Overall Real Estate Prospects.

As a multifamily brokerage firm, KIG CRE finds that investors are mistaken to overlook the opportunities still present in Chicago. Multifamily transactions this year show a strong demand for Chicago product, and a healthy in-migration of high-earning renters will help absorb the 6,613 new Chicago apartment units coming online in 2018.

The graphic below displays the multifamily transaction volume of properties greater than $10M from Q1 to Q3 2017 compared to the same time frame in 2016.

While downtown transaction volume may have decreased downtown since 2016, Chicago neighborhood transactions are up 175%. Over the past seven years, institutional capital has been focused primarily in the Loop and norther neighborhoods like Lincoln Park and Lakeview. However, a growing amount of capital has poured into neighborhoods like West Loop, Wicker Park, Bucktown, Logan Square and Hyde Park. Our far-reaching transit systems enable a larger amount of TOD than other, less transit-optimized metros (i.e. SF, Atlanta, Seattle) and strengthen the already-growing neighborhood market.

Plus, the Chicago Suburbs are also appealing to today’s investors. The Suburbs are experiencing more dispositions than Chicago’s downtown and neighborhood assets combined. Suburban transactions (in dollars) account for 57 percent of Chicagoland’s dispositions in 2017, whereas Downtown transactions account for 31 percent and Neighborhood deals for 12 percent. Suburban Chicagoland will maintain a robust demand for multifamily going forward. Its location at the intersection of many air, land and rail routes has helped retain the headquarters of big name firms like John Deere, Caterpillar, AbbVie and Walgreens. Plus, the Suburbs also host numerous logistics hubs for countless other companies.

Source: Real Capital Analytics, KIG Analytics

The in-migration of a highly educated workforce, along with continued corporate relocations into the area, will help stabilize large waves of deliveries downtown. With an anticipated 6,613 new apartment units in 2018, the continued population growth of Chicago’s core will aid absorption.

Source: U.S. Census Bureau
Original data and graphic sourced from Central Area Committee

Sources: U.S. Census Bureau, American Community Survey, Central Area Committee