Investing in Chicago real estate has become very attractive recently, especially for properties located downtown and North Side neighborhoods like Lincoln Park and Lakeview. Although the COVID-19 pandemic initially caused vacancies to rise in downtown apartments, the reopening of offices and return of students is pushing vacancy rates back down and rental rates up. Investors can capitalize on tightening vacancies and rising rents over the next few years. Chicago’s population and job growth create demand for apartments across price ranges. Investing in real estate can also provide diversification, but requires research on factors like market conditions, property operations, and financing.
Downtown and North Side have strongest rental apartment demand
According to commercial real estate firm Marcus & Millichap, demand for Class A apartments is increasing in downtown Chicago and North Side neighborhoods like Lincoln Park, Lakeview, and others. Although most offices still have low occupancy, renters continue flooding downtown and pushing up rents. Marcus & Millichap predicts vacancy rates will drop to 3.7% by end of 2022 as downtown economy recovers and population demographics remain strong.
Sales of $1M+ homes around Chicago hit new records
The number of homes sold for $1 million or more in Chicago and surrounding counties reached a new record high in 2021, according to Midwest Real Estate Data. Favorable stock market performance increased high net worth buyers’ interest in real estate. North Shore towns and downtown luxury buildings saw multiple 8-figure sales.
Consider tax reassessments downtown but strong investor appetite elsewhere
Investors remain patient for downtown recovery but target other areas right now, concerned by 2019 tax reassessment. However sales volumes in North Side and South Side have stayed consistent. Investors also targeting moderately priced properties and Class B/C apartments which can provide 8%+ capital return rates, especially near Lake Michigan and South Chicago.
Chicago presents attractive real estate investment opportunities as rents and vacancies tighten. Investors should research factors like property operations, market conditions, tax implications, and financing options. Expert guidance can help new investors capitalize on demand while navigating competitive dynamics.