REITs Embrace AI for Deal Sourcing
Major REITs Public Storage and Welltower are partnering on a new AI and data science initiative for real estate investing. The move underscores a growing trend where large firms are leveraging advanced technology to gain an edge in sourcing, underwriting, and managing assets, highlighting the increasing value of data skills in the industry.
The Midwest is increasingly seen as a stable and strong housing market, outperforming the Sun Belt in 2026 with steady rent gains and limited new supply. In Chicago's multifamily market, asking rents rose 2.8% year-over-year at the end of 2024, with vacancies at a healthy 5%. Projections for 2025 anticipate rent growth to exceed 3.5%, driven by strong demand and a shrinking supply pipeline. The city's multifamily market is considered one of the nation's strongest, with a tight vacancy rate of 4.7% as of the third quarter of 2025. During that same period, the market saw $1.1 billion in sales volume with an average cap rate of 6.7%. For comparison, as of late 2025, Chicago's Class A, B, and C suburban multifamily properties had cap rates of 5.25%, 5.38%, and 5.75% respectively. Neighborhoods like Logan Square, West Loop, and Bronzeville are drawing investor attention for their growth potential and strong rental demand. Logan Square, in particular, is noted for having median resale prices below the city average while rental prices are higher than average, creating a favorable scenario for rental income. Meanwhile, established areas like Lincoln Park offer stability and consistent demand from professionals and families. To analyze REITs, investors look beyond standard earnings per share to metrics like Funds From Operations (FFO), which adds back non-cash expenses like depreciation to better reflect a REIT's cash-generating ability. Other key evaluation points include a REIT's property portfolio, tenant lease terms, dividend history, and debt structure. It's also critical to assess occupancy rates and compare them to market benchmarks to gauge a property's competitiveness. For those looking to enter the real estate investment field, firms prioritize candidates with strong financial modeling skills, particularly in Excel and specialized software like ARGUS. A deep understanding of valuation methods, market research interpretation, and real estate finance principles is also essential. Networking and qualifications such as the CFA can provide a significant advantage. Building personal capital for real estate deals often involves tax-advantaged strategies. Investors utilize depreciation, which allows for the deduction of a property's value over time as a "paper expense" that doesn't affect cash flow. Another key strategy is the 1031 exchange, which allows investors to defer capital gains taxes by reinvesting the proceeds from a sale into a similar property. To stay current, Chicago real estate professionals often follow publications like *Crain’s Chicago Business* and its *Chicago Real Estate Daily*, along with *Bisnow Chicago* and *REJournals*. These outlets provide news on deals, market trends, and key players in the Midwest's commercial real estate scene.
