Chicago’s real estate market is experiencing an unexpected renaissance led by local investors, while international capital remains notably absent, according to a leading market expert.
“There’s a lot of local capital that’s willing to take risk in Chicago. There’s almost zero international capital, and we’re in that gray area for non-Chicago based domestic capital,” says Reagan Pratt, Director of the Real Estate Center at DePaul University.
This represents a dramatic shift from Chicago’s historical position as a gateway city for global capital. According to Pratt, local entrepreneurs are now leading the market’s evolution, particularly in adaptive reuse projects.
“We’re seeing local investors in the loop do multi-family conversions in office,” Pratt notes. “We’re seeing a lot of this entrepreneurial capital realize that the flyover doesn’t make sense.”
Despite challenges, certain sectors are showing remarkable resilience. “The strongest apartment market in the country by a lot of metrics, in terms of rent growth, has been metropolitan Chicago in the last 12 months,” Pratt says.
This performance has begun attracting domestic institutional capital, particularly in suburban markets outside Cook County, where several major portfolio transactions have recently occurred.
While local capital is currently driving market activity, Pratt argues that sustained recovery requires broader participation. “The only way we make money is if I sell that to someone, and that someone has to believe that a full building will trade at a six yield, even though I bought it at a 10 when it was empty.”
The market’s evolution has created opportunities across various sectors, though progress remains uneven. “We’re seeing it obviously in some of the hot markets, like data centers, industrials always had national capital,” Pratt explains. “But in retail and office and life sciences, it’s bit of enough of a mixed bag that we’re kind of seeing that risk off is still a work in progress.”
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