Thursday
May 26, 2016

Chicago Drawing Asian Investors to Midwest

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Chicago Drawing Asian Investors to Midwest

International buyers and investors are seeing more opportunities in the U.S. real estate market beyond the coasts, as the promise of good deals in Chicago lures them inland. The Windy City, ripe with the type of luxury properties and commercial investment opportunities that have snagged foreign money in New York and California, has seen a parallel uptick between its Asian population and luxury sales, according to the Asian Real Estate Association of America.

Biggest Foreign Buys in Chicago Last Year

  • Beijing-based Wanda Group sunk $900 million into a 90 percent stake of a new 88-story luxury tower along the Chicago River.
  • Three downtown office buildings were purchased by Asian companies: one for $302.4 million by a Beijing company; one for $218 million by a company in Seoul; and one for $111.5 million by a Tokyo-based conglomerate.
  • The 14,260-square-foot penthouse on the 89th floor of the Trump International Hotel & Tower was bought by an Indian executive for $17 million, a record residential deal for Chicago.
  • Craig Hogan, luxury director for Coldwell Banker Previews, said the company is on the verge of closing a deal that would top the Trump penthouse sale — setting another record for Chicago.

At a press conference Thursday about Chicago's rising foreign market, AREAA officials noted that the city saw a 12 percent year-over-year increase last year in the number of home sales worth more than $1 million, thanks partially to international buyers. On the commercial end, foreign investment in Chicago property jumped 40 percent between 2013 and 2014 from $3.75 billion to $5.2 billion. All of this has been happening as Chicago's Asian population soars, with the number of Chinese residents increasing by 40 percent over the last five years while Filipino residents have ticked up 15 percent.

AREAA National Vice Chair Vicky Silvano noted that Chicago has become a major force on the international scene, with 27 multinational corporations headquartered there and a 2013 trade agreement Mayor Rahm Emanuel signed with eight Chinese cities. Last year, the U.S.-China Joint Commission of Commerce and Trade summit was held in Chicago — the first year it wasn't held in Washington, D.C.

Real estate experts say Chicago serves as a natural entry point for foreign buyers into the Midwest market, but once they're there, they'll spread their influence outward to areas all over Middle America. As such, Jim Kinney, president of the Illinois Association of REALTORS® noted that areas outside Chicago also stand to benefit from the city's elevated exposure to international investors.

"[Foreigners] initially come to Chicago because they need to, not because they want to," Kinney said. "They need to have their businesses here. But once they're here, they see what a truly world-class city it is, and then they start to explore [other areas around it]."

Since international investors have begun flocking to Chicago, the amount of foreign money being invested in farmland around the state of Illinois — which has been increasing in value — has also gone up, Kinney noted. In the state capital of Springfield, one of the city's biggest hotels was recently bought by a wealthy Saudi investor.

"Who knew he would've cared about Springfield?" Kinney said.

Silvano also said she has seen more foreign investors venturing over to neighboring Indiana and Wisconsin, looking for deals at lower price points there. Other Chicago-area practitioners at Thursday's press conference agreed, saying their foreign clients tend to come to Chicago first, then move outward — even to Iowa — to seek comparable properties for less money.

"The bottom line is, if you think you're not in an international market, you haven't opened your eyes," Kinney said. "There is absolutely opportunity everywhere for international buyers, and practitioners need to be ready for them."

—By Graham Wood, REALTOR® Magazine