The Institutional Real Estate Inc Sponsorship brochure, Connected-Investor Focused, We connect people, data and insights, sponsorship, events, IREI Products
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NAREIM DIALOGUES SPRING 2018 47 Recent data have demonstrated a revitalization of suburban development taking place, particularly in the Chicagoland market. Investors are targeting sites near the village-scaled downtowns that feature some semblance of the urban neighborhoods that many of these millennials are leaving behind for greener, and less expensive, pastures. Ample opportunities for investors exist in the countless bedroom communities that serve our Nation's economic powerhouses. Take Chicago, for example. Chicago is the center of a network of smaller cities, towns, and villages. In fact, there are 250+ suburbs within the tri-state area of Illinois, Wisconsin, and Indiana. Naturally, there are more real estate investment opportunities in the larger network than in and around Chicago's Loop, but as multifamily housing unit construction is accelerating across the vast expanse of suburbs, more specific opportunities should present themselves for a less tapped product beyond simply multifamily, such as smaller detached homes, townhomes, or duplexes to name a few. Are urban and suburban multifamily housing where investors should be pouring their money; or is a transition about to take place that opens up a substantial market for some of the most under delivered, medium-density housing types? So What Exactly Are Millennials Looking For? It is undeniable that a substantial amount of money has been made by investing in high-density, urban rental housing in Chicago. As neighborhoods such as South Loop, West Loop, and River North continue to see construction cranes populate vacant parcels, an occupancy slow-down is inevitable. Concessions and empty units are common. Costs have soared higher and higher as contractor capacity is low and an unpredictable economic and political climate exists. This highly competitive market is seeing thin margins to achieve successful returns. Though not the only targets for this highly-amenitized housing, Millennial preferences may be shifting, which is causing a strain on new apartment deliveries. There is certainly a convenience factor for living so near work and having multiple options for public transportation. Living near restaurants, bars, shareable amenities, nightlife entertainment, and other young singles makes these inner-neighborhoods incredibly attractive for the urban-inclined; however, as this generation is aging, so too are its preferences. As the Millennial generation begins to form long-term relationships, a need for larger housing units and a place for our children – typically animal children – to roam. Concerns about quality schools that are affordable, or preferably public, start to populate the backs of minds. Home ownership, in spite of that pesky student debt, begins to become a priority. It may be, however, a slightly terrifying thought for the city-dweller to have to move out to our parents' suburbs in order to find housing options that satisfy these new criteria. A choice to stick it out in the City or move away for those greener pastures may seem like a bipolar decision, but maybe there is an in between. Is it possible that what people are looking for is a higher level of density, amenity, affordability, and convenience? The Untapped Potential of the Suburb Investors are making it a less intimidating transition to the suburbs by providing housing choices that closely reflect that of the urban core: mid-rise, highly-amenitized apartments that bring like-minded individuals together in contained communities near village downtowns. There is likely more bang for your buck, so the move feels lateral, as opposed to a step down from, say, Chicago's Wrigleyville to Forest Park. Though the commute may be a bit longer, the suburban location is transit-served along Chicago's Metra commuter rail service and located near shops and restaurants. These suburban targets are an excellent investment that take advantage of what both the city and surrounding communities have to offer. Here is the catch: it is only filling a temporary need for a generation of late blooming home-buyers. The untapped potential of suburbs, and outer urban neighborhoods for that matter, may be better revealed with for-sale housing types that are located within walkable, amenity rich downtowns. The 250-unit apartment building serves as an excellent stopover for a year or two, while a prospective buyer can try out an unfamiliar community and search for that perfect starter home; however, in most communities within the Chicagoland area, the housing stock is tired. Limited new housing of quality exists in most of Chicago's suburban communities. ©iStock.com/efenzi