Insights

Over the last decade, multifamily properties have been one of the most targeted investments for real estate developers and investors. Class A apartments, student housing, senior living, and built-to-rent have all been popular sub-asset classes within multifamily. While the type of property is important, location has always been one of the primary driving forces of a real estate investment’s success. Location trends shift over time, and Chicagoland 1031 Exchange has, for several years, been working with DST sponsors that tend to focus on more suburban locations. Before the pandemic, urban, city-center apartments were one of the most popular locations. A housing shortage brought on by the lack of development during the 2008 recession, the millennial generation’s desire for apartment living over home ownership, and the proximity to the highest paying jobs and vibrant nightlife all contributed to bullish investor sentiment toward urban housing. However, the pandemic changed a lot for urban living. With offices shutting down, living close to work was no longer a benefit. Restaurants and entertainment venues couldn’t operate so that perk also went away. Residents had to spend their time inside their homes or enjoying the outdoors. With urban areas typically offering low square footage and limited outdoor recreation activities, they were not a particularly desirable place to weather the pandemic. This began a shift to the suburbs. CBRE discusses this in their 2022 Real Estate Market Outlook: “As of Q3 2021, urban vacancy rates average 5%.... By contrast, suburban properties fared better… income uncertainty, a preference for outdoor options, a need for more space and more millennials with growing families requiring schools—drove demand for apartments in lower-density and lower-cost submarkets.”¹ The same CBRE article predicted a shift back to urban living, citing return-to-office policies as one of the main driving factors. Fast-forward to today closing in on Q2 2024, things look a little different. Return to office has not happened to nearly the extent and speed at which many thought it would. Additionally, economic factors such as rising interest rates and inflationary pressures have taken their toll on multifamily properties in all locations. These factors put an outsized downward pressure on urban properties, which pushes residents to the suburbs. A recent article published in Real Assets Advisor titled “The suburbs have become multifamily’s new land of opportunity” discusses this move to the suburbs as an investment opportunity. It refers to suburban multi-family as recession resistant and says, “if the economy is performing poorly, renters in the city will look to nearby suburban communities that offer the same perks for lower rents. Whether the economy is stronger or weaker, there will always be steady demand for well-located, high-quality multifamily product in suburban markets.” This sentiment is echoed by the Wall Street Journal citing a report from Apartment Listings which shows that suburban rent has grown 26% since 2020 which is 8% higher than the gain in urban centers.² While there are still opportunities in other types of areas as well, these reasons and more are influencing Chicagoland 1031 Exchange’s continued interest in properties with suburban locations. To learn more about how we analyze locations and conduct due diligence on investments for our clients, contact our advisors today.

1. CBRE 2022 Real Estate Market Outlook
2. Wall Street Journal

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The rising interest rate environment of late 2022 and early 2023 has had a significant impact on commercial real estate activity. While prices have not declined as much as some analysts expected, transaction volume has waned as buyers and would-be sellers are likely finding it difficult to find an acceptable price for both sides. U.S. commercial real estate investment volume fell by approximately 57% in the first quarter of 2023 compared to the same quarter in 2022.¹  Read More

2022 has seen an abrupt end to the era of historically low interest rates, which began in earnest in 2009. The increasing cost of capital has had significant impacts throughout the economy and certainly will continue to do so into the future. One area directly affected is the cost of housing, where interest rates on a 30-year mortgage have increased from under 3% to over 6% in less than a year.¹  Read More

As the ongoing COVID-19 pandemic, inflation concerns, and the war in Ukraine illustrate, it can be difficult to decide where and how to invest money in volatile environments. As we like to say, we don’t have a crystal ball to predict the future; instead, we focus on the bigger picture to help us identify opportunities. We believe that the multi-family sector – long a bedrock of our real estate investment strategies – deserves investors’ attention in 2022.  Read More

In our previous blog, we covered the phenomenon of how a macro real estate bull market erupted from the COVID-19 pandemic. Now, as we (hopefully) begin to come out the other side, the question becomes: how should an investor approach this environment? Across the board, real estate prices have been increasing, and multi-family assets are no exception. These higher prices have investors looking at low purchase cap rates. Certainly, these factors need to be considered; however, we also believe they should be put into context with what may be on the horizon for multi-family assets.     Read More

The fallout from a Black Swan event, like the COVID-19 pandemic, can manifest itself in counter-intuitive ways. The economic devastation seen throughout the world in 2020 is undeniable; yet, amidst the havoc, we also witnessed one of the biggest booms in housing prices in U.S. history. According to the Case-Shiller National Home Price Index, which tracks price changes of single-family homes, housing prices rose 9.5% from November 2019 to November 2020. How does this happen while we’re simultaneously dealing with the worst pandemic in 100 years?  Read More

Recently, the White House released the details of President Biden’s proposed $1.8 trillion American Families Plan. The President’s proposal outlines several tax increases intended to help finance parts of this monumental spending—including changes to 1031 exchanges that, if passed, will severely limit the ability of everyday Americans to complete an exchange.  Read More

While it wasn’t obvious at the time, it’s now clear that the COVID-19-induced sell-off this past spring created one of the best stock buying opportunities of our lifetime—the S&P 500 is up nearly 65% from the low and the Nasdaq is up roughly 80% over the same time. The tectonic shift in our economy also set some stocks skyrocketing; as of January 31, 2021, Zoom is up 235%, Moderna is up 712%, and Tesla is up nearly 1,000%!  ^{Read More}

An alternative investment is an investment that does not fall into the traditional asset class of stocks, bonds, and cash. The most common types of alternative investments are precious metals, oil and gas, venture capital, hedge funds, and real estate. An investment made into a DST to complete a 1031 exchange, for example would be considered an alternative investment.  Read More