Investment Prospects for Chicago and Midwest Improve
The region has strengthened economically, but remains far more affordable to investors.
CHICAGO—The investment landscape within the US went through a significant change in the last few years. An economic recovery that was first confined to the nation’s gateway markets spread to secondary and tertiary markets, transforming many into great places to invest. At the same time, gateway prices increased so much that some potential buyers have begun avoiding investments there.
As a result, according to the new Emerging Trends in Real Estate report by the Urban Land Institute and pwc, things are looking up in many Midwest markets including Chicago, which, although considered a gateway market, historically has lower prices than the coastal regions. That might not be apparent at first glance, as Chicago ranked 49th on the group’s list for overall real estate prospects.
However, “the difference between Chicago and the top-rated cities is so slight,” Anita Kramer, senior vice president of the ULI Center for Capital Markets and Real Estate, tells GlobeSt.com. ULI uses a formula that considers both the prospects of further growth and the price of real estate in a given area. And the increased strength of so many metro areas means this “is a highly compressed ranking. There are so many opportunities for across the country at this point.”
Dallas, for example, the top-ranked city in the nation, bests second place Brooklyn, NY. “Many gateway markets have started to drop out of the top twenty,” Kramer adds. Raleigh/Durham, Orlando, and Nashville, for example, the third, fourth and fifth ranked cities, beat out hot but expensive markets like Manhattan and San Francisco, ranked 32nd and 41st, respectively.
Places like that are now too expensive for many young people, and growth in that population, so sought after by employers, is one of the most important qualities sought by investors. Indianapolis and Minneapolis, ranked 19th and 22nd, are tops in the Midwest, due to their affordability and excellent prospects for growth.
“The Midwest’s East region has a reputation of losing younger residents to other areas of the US,” according to ULI, but the statistics tell a different story. In fact, “Cincinnati, Columbus, Indianapolis, and Madison all have a higher percentage of residents under 24 years of age when compared with the same statistic on the US level.” And “Chicago, Columbus, Indianapolis, and Madison also have a higher population percentage in the prime worker years of 25 to 44 than the US as a whole.”
These Midwest metros are often considered peripheral, Kramer says. “But many are diversifying and finding new economic drivers.” Minneapolis is a good example of a city that has developed a 24/7 live, work, and play atmosphere, along with an affordability that will keep attracting young people.
“Investors who take the time to look continue to be surprised by the number of hidden gems they can find in the region,” according to ULI.