6 Midwest ‘Flyover’ Markets Not to Miss
Midloch Investment Partners' Tim Donovan on what these locales have to offer investors.

Tim Donovan
The Sun Belt gets a lot of attention, and the coastal elites love their enclaves. But the Midwest is best as a haven for investing equity in middle-market multifamily and commercial real estate, especially if you can acquire properties at a discount in the first place.
A host of reasons account for the attraction, starting with the fact that most Midwestern markets don’t overheat like so many other areas. In other words, they’re not prone to hyper-growth. That’s okay.
As a value investor, we don’t chase hyper-anything. Rather, most of our preferred Midwest markets are consistently consistent—with solid, stable demographics, supply and demand generally in balance, and some nice growth tailwinds expected over the medium term (say three, five or seven years).
Said another way, hyper-growing markets are by no means a prerequisite to generating above-average rates of return. That’s especially true if investments are made at a discount relative to market pricing and if there’s the potential to add value to heighten cash flow and appreciation. At the end of the day, it’s the real estate that you (and we) are investing in, not geography.
Still, market dynamics are important. The Midwest markets we like typically have a high presence of Feds, eds and meds: Feds as in the Federal government, including government agencies and workforce; eds as in educational institutions, be they public or private; and meds as in major healthcare facilities such as teaching hospitals and medical centers that often are magnets for public and private investment.
By these measures, these six markets stack up nicely. They’re not the only markets we like, but a sample.
1. Cincinnati
The Cincinnati metro area’s economy is the largest in Ohio and the fifth largest in the Midwest, according to the U.S. Bureau of Economic Analysis. The region’s diverse economy is home to significant manufacturing facilities, including GE and Johnson & Johnson subsidiaries, and corporate headquarters for notable nameplates like American Financial Group, Kroger and Procter & Gamble. And there are many other leading and emerging companies in health services and biotech. Numerous higher-ed institutions including the University of Cincinnati (the second largest in Ohio), Xavier University, and Miami University are located in the greater Cincinnati area, as are more than 14,000 Federal employees.
2. Columbus, Ohio
Ohio’s capital city, Columbus boasts 52 college campuses, including Ohio State University (one of the largest universities in the United States) and the headquarters of 16 corporations in the Fortune 1000 and the science and technology institute Battelle. Intel, the chip-maker, is making a massive $20-billion investment in two new semiconductor manufacturing facilities in the Columbus suburbs.
3. Des Moines, Iowa
Iowa’s state capital, Des Moines is a hub for advanced manufacturing (including agribusinesses), insurance and financial services. The region is home to multiple universities, including Des Moines University and Drake, along with Principal Financial Group, a regional Wells Fargo Financial headquarters and Hy-Vee grocery.
4. Kansas City, Kan.
Kansas City is a leading economy in the Midwest, with a dynamic corporate center that’s home to some of the region’s largest and most well-established companies, including Cerner Corp. and H&R Block. The presence of the health-care sector looms large, with the University of Kansas Hospital and Medical Center, Providence Medical Center, HCA Midwest, Saint Luke’s Health System and Stower’s Institute for Medical Research combining to generate thousands of good-paying jobs across the region.
5. Madison, Wis.
Wisconsin’s capital city, Madison is home to the University of Wisconsin-Madison, the state’s flagship public university campus with about 50,000 students. It’s also home to the University of Wisconsin health system, and to leading and emerging healthcare and biosciences companies, like Epic Systems and Exact Sciences. Sub-Zero Group, the appliance manufacturer, also calls Madison home.
6. The Twin Cities
The Twin Cities of Minnesota, with one of the lowest regional unemployment rates in the U.S., is home to a diverse economy with high concentrations of employment in trade, transportation and utilities; educational and health services; professional and business services; and public administration. In addition to St. Paul being the state capital, the region is home to 16 companies in the Fortune 500 (the highest concentration of Fortune 500 companies per capita) and 36 colleges and universities, including the University of Minnesota and the University of St. Thomas.
Indeed, the fundamental stability of markets like these (and there are more in the Midwest) offer some built-in downside protection by their very nature. For value investors like us who serve the multifamily and commercial middle-market, there’s no place like the Midwest.
Tim Donovan is director of Investments for Midloch Investment Partners, a Midwest-based real estate investment firm and fund manager that focuses on joint-venture equity investments. Midloch invests in multifamily, industrial, retail and office properties, partnering with local developers and operators using a value-add strategy.Â