By Aaron Sklar, Kiser Group
The Englewood neighborhood in Chicago continues to be overlooked by the commercial real estate industry, particularly apartment investors. While people have cited crime and a challenging renter base as reasons they don’t invest in the neighborhood, there are three key investment parameters that are being overlooked. From cash flow to Opportunity Zones to new neighborhood development, Englewood is heating up.
It’s rare in Chicago’s more popular or established multifamily investment neighborhoods such as Lincoln Park, Old Town, Gold Coast, etc. to have strong year-over-year rent growth coupled with strong appreciation for the building. Englewood, as well as other south and west side neighborhoods, can give investors better cash flow than north side neighborhoods. Of course, property management is the key to success. But with the right property management, a typical investor can pay back their investment in two to five years. The cost to enter this market is substantially less than other areas.
Building off of strong cash flow and appreciation, long-term investors can also enjoy tax benefits from opportunity zone investments. The majority of the Englewood neighborhood is within the opportunity zone lines. There has been an influx in activity due to opportunity zones, but there is still a healthy supply of untraded apartments.
While retail is struggling in most neighborhoods of Chicago, it is growing in Englewood. A 5-acre development named Englewood Square has been a huge catalyst for higher-end retail entering the area. Within Englewood Square there is a Whole Foods, Chipotle, Starbucks and other retailers. Retail is commonly referred to as an indicator of apartment growth, and we couldn’t agree more.
From cash flow to opportunity zones to retail development, Englewood should be on every investor’s radar. Personally, I’ve seen investor interest increase over the past three years, but it is still not as strong as the conditions are ripe for.