High-rise buildings along the Chicago River.
Move over New York, Asia’s super-rich are shifting their attention to Chicago, splashing cash on towering skyscrapers in the downtown area.
By Romesh Navaratnarajah
Many property investors from the Far East are starting to look outside traditional gateway cities in the US when spending their money. In recent years, Chicago, the third largest metropolitan area in the nation, has emerged as one of the top destinations for international investment, with Asians pumping in millions to buy commercial buildings and high-rise apartments in the city.
According to Vicky Silvano, National Chairwoman of the Asian Real Estate Association of America, around 16 percent of the US$20.2 billion of real estate transactions in Chicago last year were to foreign investors.
“Retail and office towers dominate most of the foreign investments, although luxury homes are also part of the mix due to the high quality of universities and colleges in Chicago.”
Two of the world’s top universities are located there: the University of Chicago, which has produced 18 Nobel Prize winners, and Northwestern University. Other main attractions include a highly-qualified workforce, good transportation network, and political and financial stability.
“Like other American cities, Chicago suffered through the 2008 Global Financial Crisis, but has exhibited a steady recovery in subsequent years,” said Tom Kirschbraun, International Director, Capital Markets at JLL.
“The influx of major corporate headquarters such as United Airlines, Boeing, ConAgra Foods, Google Midwest, and soon, McDonalds to the downtown, has boosted economic indicators tremendously.”
Silvano added that strong employment figures and wage increases there are outpacing many other US cities. “Chicago’s economy is not dependent on any one industry. It has a vibrant manufacturing sector, the second largest financial market in the country, and a huge medical industry employing over 300,000 people.”
Separately, a joint study by Foreign Policy magazine and international consulting firm A.T. Kearney, ranked Chicago as the seventh most influential city in the world, trailing only New York, London, Paris, Tokyo, Hong Kong and Los Angeles. The annual report looks at five core metrics, namely business activity, human capital, information exchange, cultural experience and political engagement.
Cheaper than New York
Housing prices in the Windy City are considered more affordable, meaning “the middle-class is not priced out of Chicago’s real estate market as they are in some other US cities”, said Silvano.
For instance, an apartment in Chicago costs roughly half as much as a similar unit in New York City, Kirschbraun said. “This is due to the abundant availability of land for new development, as opposed to the island of Manhattan.”
Global Property Guide, citing data from Standard & Poor’s Case-Shiller index, revealed that Chicago registered a price increase of 1.7 percent year-on-year in 2015, one of the lowest growths in all 20 major US cities.
With 5,000 new residential units entering the market in 2016, demand for rental housing is expected to surge, said Silvano. “High demand driven by millennials who want to live in the city without the burdens of ownership has pushed rental rates in prime locations near Chicago’s Loop (central business district) to US$4 psf per month.
“A typical 1,000 sq ft apartment will cost between US$3,000 and US$4,000 a month. While less expensive compared to New York or San Francisco, it does represent a significant rise in new apartment rental rates in Chicago.”
While every property is different, investors could receive a cash-on-cash return of about three percent on rental properties, said Kirschbraun.
Trump leads the way
The staggering amount of capital being invested in Chicago hasn’t gone unnoticed among property developers.
US presidential hopeful and billionaire property magnate Donald Trump’s Trump Tower Chicago is one of the major additions to the city’s skyline. Completed in 2009, it is located along the Chicago River. The 92-storey development is currently the tallest residential building in the city, and contains over 480 condominiums and 339 hotel suites.
Chezi Rafaeli, a broker with Coldwell Banker, told PropertyGuru that 30 percent of the project’s buyers are Asian, mainly from China, Hong Kong and Korea.
“It has the best views of Chicago and offers a very similar feel to projects in Asia,” he said. Other key features are the high ceilings that average 10 feet, and a 14,000 sq ft health club with an indoor pool and spa.
He recently sold an entire floor at the development for US$17 million to an Indian national who works in software development. An additional US$15 million was spent on lavish renovations for the approximately 15,000 sq ft property, as the “buyer wanted to select his own finishes”, noted Rafaeli.
In fact, many foreign buyers are wealthy enough to purchase these luxury homes in cash. In 2014, 62 percent of all foreign purchases were cash transactions, said Silvano. But for those who need financial support, she shared that the lending process is relatively easy if a foreign buyer has an offshore account with an American bank.
Water views
Next month, JLL will launch Vista Tower, a new development in Chicago’s Lakeshore East, to Singaporean buyers at the St Regis Hotel. The residential units offer views of both the Chicago River and Lake Michigan. Jointly developed by Chicago’s Magellan Development Group and China-based Dalian Wanda Group, prices start at US$1 million for a one-bedroom unit and go up to US$17.1 million for the two-level penthouse on levels 92 and 93.
“Vista Tower is the first large-scale condominium to get underway in the last seven years. There is substantial unmet demand for this type of property, so we expect Vista Tower to be very successful,” said Kirschbraun.
Gritty, urban feel
For buyers who cannot afford high-priced apartments in the city centre, Silvano suggests they look at the West Loop district, located just west of Chicago’s Loop. Up until 1990, it was a largely abandoned warehouse area, but The Wall Street Journal now calls it the country’s hottest neighbourhood.
“With the advent of the loft concept, the area rapidly transformed into a neighbourhood of condo and apartment lofts. (Subsequently), the demand for larger, more luxurious condos spurred rapid development.
“The West Loop has a gritty, hardcore urban feel to it, much like New York’s Soho district. Restaurants, bars, theatres and art galleries abound in the neighbourhood,” said Silvano.
Property values in this area grew by over 40 percent in 2015, and will likely rise even more this year, she added.
CITY FAST FACTS
(CHICAGO)
Population: Approx. 2.7 million
Total area: 614 sq km
Currency: US Dollar
GDP per capita (US): US$55,904 (2015)
GDP growth (US): 1.4 percent (Q4 2015)
Future transport: West Loop Transportation Center
Home prices: Up 1.7 percent year-on-year in 2015
Distance from Singapore: Approx. 15,000 km
INTERNATIONAL HIGHLIGHTS
We look at two luxury residential towers in Chicago that are set to tempt investors.
NEW PROJECTS
Vista Tower
375 East Wacker Drive
Type: Mixed-use development
Developer: Magellan Development Group and Dalian Wanda Group
Tenure: Freehold
Facilities: Private dining room, wine storage, theatre, fitness room, hot tub, outdoor pool, concierge service, 24-hour maintenance services
Nearby Key Amenities: Museums, restaurants, shops, sailing clubs
Nearest Transport: Enclosed pedestrian walkway (Pedway), Riverwalk and Lakefront bike path
Starting Price: US$1 million (S$1.36 million)
Located along the Chicago River, this US$950 million hotel and residential proJect is being jointly developed by Chicago-based Magellan Development Group and Dalian Wanda Group of China. This is Dalian Wanda’s first project in the United States.
The 95-storey tower is nearly 1,200 feet tall and, upon completion in 2020, will be the third tallest skyscraper in Chicago. The first 11 floors comprise the five-star Wanda Vista Hotel, while floors 13 to 93 contain 406 luxury apartments that make up Vista Residences.
Prices start at US$1 million for a one-bedroom unit and go up to US$17.1 million for a two-level penthouse on floors 92 and 93.
No.9 Walton
9 West Walton Street
Type: Condominium
Developer: JDL Development
Tenure: Freehold
Facilities: Private dining room, wine storage, fully staffed lobby and valet, dry cleaning service, full service maintenance team, indoor lap pool, fitness centre
Nearby Key Amenities: Trendy boutiques, high-end art galleries, restaurants, nightclubs
Nearby Transport: Car sharing service, bus service, Red Line (train service)
Starting Price: US$1.9 million (S$2.5 million)
Located in Chicago’s iconic Gold Coast area, No.9 Walton is a 36-storey project comprising 66 two- to five-bedroom units that feature spacious private terraces, very high ceilings and customisable floor plans.
Developed by Chicago-based JDL Development, the units are large, with an average of 4,400 sq ft of living space. All of the apartments feature top-of-the line finishes, including custom kitchens and bathrooms.
Residents can host wine tasting sessions in the air-conditioned wine cellar, or have the house driver chauffeur them around the city.
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