In 2015, around 150 cross border player transactions amounting to $3.27B was recorded in Chicago. This is almost double the $2.18B foreign investment in Chicago Real Estate recorded in 2013. Norway was the biggest investor with an acquisition of 63 industrial properties worth $986.7M. Canada came in second at $515.7M followed by Singapore at $475.6M. South Korea and the United Kingdom are also in the top 5 of foreign investors in the area.
From #8 in 2014 in terms of foreign investment, Chicago jumped, no, leaped to fourth place in 2015 succeeding Manhattan, Los Angeles, and Washington DC.
- 0.1 What makes Chicago attractive to foreign investors?
- 0.2 Why invest in Chicago?
- 0.3 Where are the foreign investors putting their cards?
- 1 Are you looking to invest in Chicago Real Estate?
What makes Chicago attractive to foreign investors?
Foreign investors are primarily lured to Chicago’s low real estate prices. The city registered an increase of only 1.7% in 2015, representing stability. This translates to a higher rate of return for investors. Chicago boasts of the highest capitalization rate or first rate year of return at 6%. This is followed by San Francisco at 4.7% and Manhattan at 4.4%.
Low interest rates also make the market attractive as well as the availability of financing options like mezzanine debt, preferred equity, and even crowdfunding.
The high dividend yield of Real Estate Investment Trusts (REITs) makes the market enticing for foreign investors too.
Why invest in Chicago?
Chicago is home to top universities (Northwestern University and University of Chicago, anyone?). And with infrastructure solidly in place, it houses major corporate headquarters too.
The progress of Chicago can also be attributed to the fact that it is not solely dependent on one industry for its economic growth. It benefits from the performance of several industry sectors such as the financial, manufacturing, and medical sectors.
The city is also slowly becoming a tech hub, drawing new residents to the city which in turn sparks the need for more residential and commercial development.
Not a problem at all because there is abundant, available land in Chicago which makes it possible to develop more buildings in the city.
With everything that’s going for Chicago, it is guaranteed to have a continued upward trajectory in 2016.
Just last month, we saw Chicago real estate stocks bounce back into recovery after plunging in February: 5 of 8 Chicago Real Estate Investment Trusts (REITs) delivered positive returns through April 21 bringing total local real estate index up by 1.4% (from -11.1% in February).
The mood is generally optimistic as investors see a growing economy. Rents are steadily rising and cash flow is growing modestly as well.
Where are the foreign investors putting their cards?
Apart from REITs, commercial buildings and high-rise apartments are at the top of their list. Retail and hospitality are also not far behind.
This uptrend can also be traced to improvements made on the Foreign Investment in Real Property Tax Act, which encouraged non-US investors to put more money in the US Real Estate. This could also explain why national volume also hit an all-time high of $86.92B in 2015.
On the local front, the best news is that Chicago’s current real estate pricing still embraces the middle class. They are not priced out of the market, so to speak, unlike in other cities where pricing continues to traverse on a volume-driven upward direction.
Investing in Chicago real estate is a rising opportunity you would not want to miss. Don’t be left behind.
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