7 Reasons To Invest In Chicago

20 January 2017

Investment Manager Scott Hagerman shares seven solid reasons why the Windy City is sweeping investors off their feet.

 “Chicago is a hidden gem in the world of real estate investment, a market to which investors are only just beginning to pay attention, but which has such strong potential for growth,” said Scott Hagerman, Investment Manager at IP Global.

The city has the sixth highest GDP among world cities. Expected to be the key US property investment market through 2017, interest in Chicago is growing. IP Global has had investors making high yield investments in the city over the past two years, and it’s not too late to take advantage of all that it has to offer. Here are just a few of the reasons why:

A stable, diverse economy

There is no single industry that dominates Chicago’s economy. It is diversified across a variety of markets that include finance, commerce, manufacturing, technology, telecommunications and transportation, each employing no more than 14% of the workforce.

Good growth

For the fifth consecutive year, Chicago’s economic growth increased, hitting 2.3% in 2016. Median household income in the city has been steadily rising since 2010 to reach USD63,156 in 2016, 13.2% higher than the national average. Further up the economic scale, Chicago’s new millionaire growth is now 7.1% year-on-year, the sixth-highest rate in the US.

All this growth is driving the city’s real estate market upwards. The Chicago Metropolitan median home value was up 3% year-on-year to September 2016. Similar growth is forecast for the year ahead. Within the city, growth is even more impressive. Median home values were up 6.5% over the same period.

Incoming investment

Chicago is the number one city in the US for corporate investments. It is home to the headquarters of 36 Fortune 500 companies, and a further 400 corporate headquarters and five financial exchanges.

With an upswell in international investments Chicago is fast becoming the next big thing for investors looking beyond an increasingly stretched New York. With similar housing markets and economies, Chicago offers lower real estate prices with plenty of potential. IP Global investment 1345 Wabash, a development in the desirable central South Loop district, launched in February 2015 and prices in the building have already risen by 5-6%.

A cultured and connected city

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Chicago enjoys high levels of tourism, up 3.5% since 2013. The city is the third-most-visited tourist destination in the US, and visitors spend USD13.7 billion per year. There’s plenty to see and do with an amazing dining scene and fabulous architecture, art and design. Chicago has been the setting of many Hollywood movies, and for baseball fans it’s home to the legendary Wrigley Field.

It is all easily accessible via the city’s public transit system, rated the nation’s sixth-best by Wired Magazine, to tourists and the increasing numbers of people who want to live and work in Chicago. 

Value for money

Chicago property prices are a fraction of those in other similarly sized stable cities – a third of those in New York – and prices remain significantly below peak levels. A recent report by UBS cited Chicago as the only undervalued city in an analysis of 15 key global housing markets.

Promising yields 

Compared to investors in Manhattan property who are lucky to see rental yields as high as 3% gross, in Chicago’s thriving rental market average gross yields are in the extraordinarily high 7-8% range.

As home to two of the world’s most prestigious universities – the University of Chicago and Northwestern University – and a total of 32 universities and 21 graduate schools, there is a healthy student population – the third-highest in the US – who make up a key demographic of potential renters.

Encouraging appreciation

With prices still 17% below peak, there’s plenty of room for growth.

Double-digit annual property price growth has been recorded in key neighbourhoods. Since July 2013, when IP Global entered the market, average condo prices have risen 16.2%, while prices at IP Global’s most recent Chicago project have risen 5-6% since February 2015. These figures are extremely encouraging for potential real estate investors.

Want to know more about Chicago? Check out our Market Update and Q&A with local property expert Susan Tjarksen.


 

Scott Hagerman

Written by Scott Hagerman

Scott has over ten years experience in investment advisory and financial planning services for individuals and businesses. His career began advising wealthy individuals and small to medium sized enterprises on risk management in the UK and the US, and has focused on wealth management and real estate investing since moving to Hong Kong in 2010. He has six years experience evaluating real estate investment opportunities in the US, Canada, UK, Malaysia and Australia.

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