Why Investors are Flocking to Cook County’s South Suburbs

An Analysis of Multifamily trends in South Cook County.

Over the last few years, the South suburbs of the Chicago MSA have seen a material increase in velocity and appreciation. This is in contrast to many other areas of the region, where velocity has receded.  Reasons for the increased transaction volume include stable rent growth, low vacancy, and a growing desire for affordable housing outside of the city of Chicago. Below is a chart that summarizes the year over year changes in transaction velocity:

South Cook County encompasses forty-four cities across a broad geographical range from the border of Indiana to Lemont, IL, 38 miles away. These cities are located south of highway 55 and in many cases are adjacent to Chicago, making them attractive for residents seeking a less urban lifestyle but still an easy commute for work, shops, restaurants, and the various kinds of night life Chicago has to offer.

Transaction volume in South Cook County increased by 42% between 2021 and 2022 and totaled over $100,000,000 in property sales.  Traditionally, transactions in this market have mostly been local buyers with nearby existing holdings. However, this past year almost 50% of the transactions were sold to out-of-state buyers.

There are several reasons for this shift, including:

1.       Affordable Price Per Unit:

The entry point remains low in the South Cook County suburbs when compared to other regions of the Chicago MSA.  Furthermore, out of state buyers are attracted to the price per unit compared to properties in some of the coastal cities where the asking price per unit frequently exceeds $250,000,. Due to this increased competition and outside equity targeting this market, many local owners have found it difficult to compete with the buyers entering this market for the first time.

2.       Value-Add Opportunities:

Many of the assets sold in this market have been owned by the same families for decades. This creates opportunities for buyers to reposition the assets with cosmetic renovations. While rent growth has slowed nationwide, the South Cook County region experienced an average of over 8% rent growth in 2022.  A large portion of this growth came simply from lease renewals rather than from turnouts.  For owners renovating units, rent growth was in the 10%-15% range.

3.       Low Vacancy Rates:

One of the most attractive aspects of purchasing a property in the South Cook County suburbs is the stability of the rental pool.   Many renters have resided in the same building for years – sometime for decades.  Moreover, these renters are less likely to leave to purchase a home, especially in a rising interest rate environment. As a result, occupancy rates have held between 95%-97% across the South suburbs, leading to a more consistent revenue stream.

Looking ahead, it is likely that these markets will continue to experience increased levels of investor demand both from local and out-of-state buyers. This region of Cook County continues to offer what few other markets can provide through consistent year over year rent growth, low vacancy, and a lower price entry point compared to other regions of the Chicago MSA.