When Pennsylvania-based Morgan Properties bought a $500 million portfolio of apartments across the Midwest this spring, the region finally got the recognition that local industry players long thought it deserved.
This recent success in Chicago appears to have served as a bellwether for other Midwest markets.
“We’ve got our share of problems, but Chicago to me has always been steady,” Chicago-based multifamily broker Brad Feldman of Interra Realty said.
The odds on Morgan’s bet were favorable. Rent in the Midwest grew 2.8 percent year-over-year in the second quarter of 2025, MMG Real Estate Advisors found. It was the biggest year-over-year increase in regions across the U.S. in the second quarter, and there’s still room for growth. In that period, the region boasted the nation’s lowest average effective market rent at $1,390.
Morgan might have deep pockets. But locals have a leg up in benefiting from the Midwest’s promising attributes, thanks to their knowledge of the region’s nuances.
“I’d say the lion’s share of the deals go to guys that are based here,” Feldman said.
Politics as usual
Within Chicago’s city limits, multifamily investors are walking a delicate tightrope.
The region’s strong rent growth and job market are enticing to investors. Still, stubbornly high interest rates and the city’s shaky political landscape are giving them pause.
Housing policies championed by Mayor Brandon Johnson and his allies, including an anti-gentrification ordinance passed on the city’s Northwest side and an attempted mansion tax that was defeated at the ballot box, have stirred uncertainty for investors. And property tax reforms led by County Tax Assessor Fritz Kaegi are causing whiplash between initial appraisals and final values determined through the appeals process.
“I’ve heard from institutional type people who say, ‘talk to us when you get a new mayor,’” Kiser Group multifamily broker Andy Friedman said. “If we are to get a new mayor that is a Rahm Emanuel type … I think you would see floodgates open.”
Developers certainly feel the lack of institutional capital. Last year, Chicago recorded its lowest number of multifamily project completions since 2015, according to Institutional Property Advisors. With few deliveries expected this year, vacancy across the metro is below 5 percent for the second consecutive year.
Although the slow pipeline is driving rent growth, it’s also limiting the types of buildings listed. Older assets are dominating the market, but they’re harder to manage from afar.
“The city had a building boom in the 1920s. If you want to buy in Chicago, that’s kind of what’s on the menu right now,” Friedman said. “But it is not often that you see an out-of-state investor come in to invest in a building like that.”
Older buildings on the city’s edges present an opportunity for growth because they’re selling for less than $200,000 per unit, unlike the high rises in the city’s core, which are trading for more than $400,000 per unit.
In June, Jennifer Pritzker, president and CEO of Tawani Enterprises and cousin to Gov. J.B. Pritzker, sold a six-building portfolio for $45 million to local firm Silver Property Group. The sale of the 263-unit portfolio in the city’s far north Rogers Park neighborhood came out to $171,000 per unit.
Silver’s principal, Ron Abrams, said that his firm has focused solely on Chicago since its founding 13 years ago. The company owns and operates 100 buildings in the city.
“Being here and knowing all the players got us the deal and got us financing,” Abrams said at the time of the purchase.
Similarly, Chicago-based investor David Pezzola bought a smaller portfolio of 110 units in the far South Side neighborhood of Beverly for $16.3 million this spring.
And now, seasoned local real estate investor Stuart Handler is testing the hype by listing five midsize multifamily properties on Chicago’s North and South sides.
High-rise sales aren’t at a complete standstill either.
“Our bidding activity is deeper and broader and better than it was 12 to 24 months ago,” said Chicago-based CBRE multifamily broker John Jaeger, who specializes in selling high- rises.
In February, Jaeger’s team represented the seller in a $94 million sale of a 20-story West Loop building. The buyer, Portland, Oregon-based real estate investment firm Green Cities, paid what came out to $421,000 per unit.
And in April, Chicago saw the city’s largest apartment sale in nearly two years. Local developer Moceri & Roszak and equity partner Ares Management sold an apartment tower in buzzy Fulton Market for $170 million or $453,000 per unit.
Goldilocks zone
If an investor wants the economic prowess of Chicago but the political predictability of a smaller Midwest city, then the suburbs might be just right.
With easy commuter access via public transit, Chicago’s suburbs benefit from the city’s strong job market without its hectic political environment. And buyers have taken notice. Multifamily sales jumped 65 percent year-over-year in the city’s suburbs in the first quarter of 2025, Interra found. Suburbs located outside of Cook County have performed best due to their more predictable property tax environment.
“Of these new inbound groups, 85 percent want non-Cook County suburbs,” said CBRE broker Jason Zyck. “The suburbs remain the favorite location for investment.”
The average price per unit in the suburbs rose 18 percent year-over-year in the first quarter, from $120,349 to $142,935, according to Interra.
An analysis by The Real Deal of 27 multifamily properties that sold for more than $10 million in the Chicago metro area late last year found that 17 traded at a markup from their last sale price. Of those, 11 were in the suburbs. That trend continued into the new year, Interra found.
There were seven suburban multifamily transactions in the $10 to $50 million range in the first quarter compared to just 13 in all of last year.
Most recently, a venture of Chicago-based Laramar sold a 242-unit suburban Warrenville complex, the Westlyn, for $59 million or about $245,000 per unit. The buyer was Maryland-based Artemis Real Estate Partners.
And lenders are shelling out for new developments too.
Chicago-based Banner Real Estate in July secured $124 million in construction financing for an apartment complex in the west Chicago suburb of Wheaton.
Midwest momentum
After cities such as Austin, Nashville and Tampa experienced a pandemic-fueled building boom, the Midwest quietly emerged as a potential safe haven for investors spooked by the Sun Belt’s faltering fundamentals.
“The Midwest did not get over their skis on development, as other parts of the country did, so in general, the Midwest has a healthy supply-demand balance,” Jaeger said.
As Sun Belt cities became oversupplied and interest rates climbed, some deals quickly went south.
In contrast to the Midwest, the Southeast saw rents grow by only 0.4 percent, and the Southwest actually saw rents decrease by 0.9 percent, MMG found.
“[Institutions] that were very focused predominantly on the Sun Belt are seeing those negative trade-outs. They’re seeing completely negative rent growth, where they’re probably 20 or 30 percent below where their pro forma was on rents,” Chicago-based CBRE multifamily broker Justin Puppi said. “They look to the Midwest, and Chicago specifically, and they see the rent growth and they’re willing to accept that the circumstances are uncertain.”
Despite being smaller than Chicago, other Midwest cities can support investor interest without some of the complicated political hurdles Chicago faces, Feldman added.
“Milwaukee, Indianapolis and Detroit have been popular with Blackstone and some other groups that are buying both single family and multifamily,” Feldman said.
And so far, supply hasn’t outpaced demand.
In the Midwest, there were about 58,000 multifamily units under construction as of the second quarter of 2025 compared to 93,000 in the Northeast, 110,000 in the West and 235,000 in the South, Cushman and Wakefield found.
“Our debt costs are the same whether you’re in the Sun Belt or you’re in the Midwest,” Jaeger said. “So you can get positive leverage out of the gate, which is probably one of the only areas in the country where you can do that.”