Billionaires Said to Favor Private Equity Over REITs
An investor noted that billionaires often prefer private equity real estate deals, such as value-add and development projects, over publicly traded REITs. This preference is driven by the desire for greater control and potentially higher returns. In high-interest-rate environments, private debt strategies are also gaining favor among these investors.
- The Chicago multifamily market is positioned for steady performance, with a low construction pipeline expected to result in fewer than 4,000 new units in 2026, the lowest since 2012. This scarcity contributes to a projected vacancy rate of 3.8% and supports modest rent growth, with average effective rents expected to reach $2,300 per month. Neighborhoods like Logan Square, Pilsen, and Bridgeport are considered cash flow hotspots with cap rates potentially ranging from 6% to 9%. - In contrast to private equity's property-level focus, analyzing publicly traded REITs requires different metrics. Instead of earnings per share, investors use metrics like Funds From Operations (FFO) and dividend yield to gauge a REIT's cash-generating ability and income potential. The Net Asset Value (NAV) approach, which determines the fair market value of a REIT's underlying properties, is a core valuation method. - For those transitioning into real estate investment, Chicago firms prioritize specific analytical skills. Job descriptions for analyst and associate roles frequently require proficiency in financial modeling—including IRR and equity multiple analysis—and software like Argus and Excel. Networking is also crucial; organizations like the Chicago Area Real Estate Investors Association (CAREIA) and various Meetup groups host regular events. - The Midwest region offers a compelling case for multifamily investment due to its relative affordability and stable returns. Average multifamily rents in the Midwest are around $1,405, significantly lower than the national average, attracting investors to Class B and C workforce housing. The region also boasts the highest average cap rate among all U.S. regions at 6.0%. - Adaptive reuse projects are becoming a critical source of new housing supply in Chicago as ground-up construction faces constraints. In 2026, 806 of the 1,664 projected new units downtown are expected to come from adaptive reuse projects, with neighborhoods like Uptown and Lakeview also seeing significant conversion pipelines. - To understand the industry, professionals often follow publications from research firms like CBRE and Marcus & Millichap, which provide detailed market reports and investment forecasts for the Chicago area. For deal-making insights, networking with members of groups like the Urban Land Institute (ULI) and the Commercial Real Estate Development Association (NAIOP) is common practice.
