For real estate investors and developers, the ongoing stagnation of interest rates at the current and historically low levels continues to represent an excellent financing opportunity. It also has made it a little more challenging to find attractive deals due to increased competition after several years of recovery in the real estate market. But in our area, these deals remain plentiful.
Investors Are Shifting Their Attention to the Suburbs
As competition in the downtown Chicago market has narrowed return prospects, savvy investors have headed west in search of opportunity.
Demographics have also begun to favor the suburbs. There has been an influx of Millennial renters looking for more value for their leasing dollars. With homeownership currently well below its historical high, investors and developers could benefit in the future, as these young renters start to form families, look for schools and establish roots in the area.
In fact, we’ve been involved in financing more multifamily projects recently. Some of these deals also benefited from a developing trend: deconverting condo complexes into rental units.
Beyond apartment projects, opportunities involving industrial spaces, suburban office properties, self-storage, strip malls with leasing strength and single-credit tenant deals (such as those involving national drugstore chains) also remain robust.
Who Is Investing?
Today, the market is dominated by strong, experienced real estate investors who have the economies of scale needed to build one- and two-story, 200-plus-unit apartment building projects.
Developers who can buy distressed office properties, rehab them and lease the resulting suites at Class A rental rates are also quite active. Additionally, we are seeing growing opportunities for clients with 1031 exchange funds who are interested in single-credit tenant deals where the strength of the tenant drives the deal and the service provided enhances the livability of the area. Examples of this would be deals involving properties leased to large national chains like Walgreens or CVS.
Access to a Competitive Advantage
As investors and developers move beyond the Chicago city limits, it helps to have a resource with deep roots in the area. And, in a competitive deal-making environment, it can help to work with a lender that can customize financing structures and approve them with speed.
Thanks to a rare combination of experience and a flat organizational structure, banks with local experience like Old Second have the freedom to be more creative when it comes to customizing financing structures in instances that don’t quite fit the standard transaction formula. It also means decisions are made, not passed up the organization, saving real estate borrowers time and frustration.
Whether you are a seasoned developer or a professional real estate investor—or if you are looking to complete a 1031 exchange—we invite you to call us at 630-906-2000.
You can also visit us here. We can’t wait to talk to you about what we can do for you today.