Chicago's South and West Sides Shine in Multifamily Market

Why the South and West Sides?

The South Side, particularly neighborhoods like Hyde Park, Woodlawn, and Jackson Park, are hotspot areas due to their proximity to the future Obama Presidential Center. This development is expected to bring in a new wave of residents and businesses, making properties in these areas much more sought after.

Investor Interest in Hyde Park

Hyde Park is an area that is notoriously difficult to break into due to its desirability as an investment destination. Once a property becomes available, it quickly grabs the attention of numerous opportunistic investors. This is largely because of the long-term potential of the area, as well as its growing population and Infrastructure developments.

West Side Momentum

The West Side of Chicago is also experiencing rapid growth. Investors are eager to expand their portfolios by tapping into submarkets here, leveraging the potential for value addition in this region. Transaction volume in the Chicago multifamily market may have slowed down in the first half of the year, but property fundamentals are expected to improve through the second half, particularly in downtown submarkets where absorption has been strong.

Market Stability and Rents

The vacancy rate remains stable at 5.1% in the second quarter, continuing a trend that has kept vacancy rates fluctuating between 4.5% and 5.5% since 2021. Asking rents have also shown a slight increase of 1% from the previous year, indicating a positive trend in market conditions.

Types of Properties Attracting Investors

 Investors are particularly drawn to properties that offer potential for value addition—whether it's through renovation or new construction—and those with assumable loans. In a market characterized by high interest rates, assumable loans provide an attractive option for maximizing returns.

Value-Add Properties

Properties that require renovation or alteration to meet investors' standards are in high demand. These opportunities allow investors to transform existing buildings into more desirable living spaces, increasing their potential for higher rents and better occupancy rates.

New Construction and Assumable Loans

For those willing to go the hands-off route, new construction offers a relatively stress-free investment option. New buildings can generate cash flow right away and require less immediate upkeep. Additionally, taking on an existing loan at a lower interest rate through an assumable loan enables investors to maximize their returns in a high-interest environment.

Recent Transactions

Noah Clark and Jack Petrando of Kiser Group have been involved in several notable transactions on the West and South Sides. Recently, they represented sellers in the sale of several multi-unit apartment buildings. For instance, a nine-unit building in Lawndale sold for $755,000, a six-unit building in Austin sold for $390,000, and a six-unit building in East Garfield Park also sold for $450,000. On the South Side, a 12-unit apartment building in Chatham fetched $750,000.

Future Potential

The South and West Sides of Chicago are poised for significant growth due to ongoing community improvements and gentrification. These areas are projected to become zones of large-scale growth, pushing up property values and demand.

Community Rejuvenation

As city officials plan for the future development of downtown Dallas, Chicago’s South and West Side neighborhoods are undergoing their own transformations. Efforts to revitalize these areas are driven by a vision of creating dense, safe environments that attract new residents and businesses.

Investment Strategies

For those considering investment in Chicago’s multifamily market on the South and West Sides, understanding local market trends is crucial. Identifying areas with high potential for value addition or those offering new construction opportunities can yield strong returns.

FAQs

1. Why are multifamily investors targeting the South Side?

Investors are drawn to the South Side due to its proximity to the future Obama Presidential Center, which is expected to attract many new residents and businesses, increasing property value.

2. What types of properties are investors looking for?

Investors are looking for properties with potential for value addition through renovation or new construction, as well as those with assumable loans to maximize returns in a high-interest environment.

3. Are rental rates increasing in these areas?

Yes, rental rates are showing minor increases, indicating stability in the market despite some overall fluctuations.

4. How important is community rejuvenation in these areas?

Community rejuvenation is crucial as it not only improves living conditions but also drives up property values and enhances the area's appeal to investors.

5. What recent transactions have been notable on the West and South Sides?

Recent notable transactions include the sales of several multi-unit apartment buildings by Noah Clark and Jack Petrando of Kiser Group, showcasing the active market.

Data Points

• Current Vacancy Rate: 5.1%

• Rental Rate Increase: 1% from a year ago

• Transactions in First Half of Year: Down by half compared to the same period in 2023

• Projected Future Growth: Significant due to gentrification and community improvements

• Recent Sales Examples:

    - A nine-unit building in Lawndale sold for $755,000

    - A six-unit building in Austin sold for $390,000

    - A six-unit building in East Garfield Park sold for $450,000