Institutional Multifamily Investors and Nearby ‘Burbs

Not so long ago, institutional multifamily investors, such as REITs, pension funds and private equity partnerships, wanted their apartments in urban cores, and for very good reason. The millennial demographic, which was growing up and moving out of childhood homes, sought rental properties that were close to, if not within walking distance of, entertainment, restaurants and jobs.

However, as yield continues to drop, multifamily investors are now focused on buying, or developing, in the neighborhoods surrounding the core markets. Susan Tjarksen, principal and managing broker at Chicago-based KIG CRE LLC, noted that, for example, Evanston, Hyde Park and Oak Park, suburbs that are immediately adjacent to Chicago on the north, south and west sides, respectively, are proving to be attractive to developers.

“(These locations) have access to public transit, a plethora of amenities, including proximity to retail and entertainment, and have strong demographics,” Tjarksen said. One reason for the great demographics is because Evanston is home to Northwestern University, while Hyde Park contains University of Chicago. Furthermore, Concordia College and Dominican University are not all that far from Oak Park.

This trend is not unique to Chicago, Tjarksen said. “With more favorable cap rates,” she added, “these neighborhood deals are becoming a logical choice.”

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