Top 5 Midwestern Markets for Multifamily Transactions

Even as deal velocity has slowed nationwide, one market’s volume through October picked up by nearly 50 percent compared to last year.

Multifamily transaction volume in the Midwest has slowed this year, with $4.5 billion in sales closing through October. This marks a 38.7 percent decrease compared to the same period last year, similar to the decline in activity nationwide. While fewer deals and lower price points may be unsurprising given ongoing economic volatility, investment—particularly in well-located, stabilized Renter-by-Necessity communities—still pushes on.

The table below highlights the five Midwestern markets with the highest overall transaction volume year-to-date through October, based on Yardi Matrix data. These metros account for just shy of two-thirds of the region’s investment activity, though notably, only one market reported an increase in volume this year compared to last.

 

5. Indianapolis

Downtown Indianapolis. Image by David Mark via Pixabay.com
Kingston Square

Multifamily investment in Indianapolis began the year on a strong note, with $245 million in transactions closing by the end of the first quarter. However, amid heightened economic uncertainty, deal velocity slowed in the months following, with year-to-date transactions totaling $423.4 through October, compared to $443.5 million during the same period in 2019.

The largest single-asset deal was the $44 million purchase of Kingston Square by a private investor. Green Realty was the seller of the 523-unit community at 7171 Twin Oaks Drive, roughly 10 miles northeast of downtown, near the Interstate 465-Pendleton Pike interchange. The transaction was financed with a $33 million bridge loan from UC Funds.

4. Twin Cities

Valley Creek

The Minneapolis-St. Paul metro recorded just shy of $470 million in deals through October, essentially half the investment volume of the first 10 months of 2019, when more than $1 billion in deals closed. While transaction volume was split relatively evenly between suburban and urban zones, a clear distinction emerges in terms of asset quality: Class B and C assets made up the vast majority of acquisitions, accounting for more than 75 percent of total volume.

Transactions slowed later in the year, but large deals continued to close. DRA Advisors’ $71.6 million acquisition of the 402-unit Valley Creek in September marked the metro’s largest transaction of the third quarter. Seller Marquette Cos. had paid $54 million for the Class B asset, located at 1707 Century Circle in the eastern suburb of Woodbury.

3. Kansas City, Mo.

Coach House. Image courtesy of Berkadia

Although more than 8,000 units changed hands through October in Kansas City—the highest among Midwest markets—lower pricing places the metro third on our list, with $470.9 million in closed deals. Kansas City’s multifamily sector has proved resilient amid wider volatility, with rent growth outpacing the national rate.

Landmark Realty’s $81.5 million acquisition of the 807-unit Coach House was the largest multifamily transaction in Kansas City this year. Landmark assumed a $56.4 million CMBS loan from the seller, Harbor Group International. The suburban property traded just half a year after the previous deal purchasing the community from Aragon Holdings as part of a nationwide, $1.8 billion deal.

2. St. Louis

St. Louis skyline. Image by stefib230 via Pixabay.com

St. Louis ended October with $531.8 million in closed multifamily transactions. The metro started the year off on strong footing, though volatility in the second quarter led to a near-complete halt in sales. However, St. Louis’ activity surged to nearly $210 million in the third quarter, roughly on par with Q1. This puts the year’s investment volume nearly 50 percent higher than the same period in 2019, a greater increase than all but a handful of markets nationwide.

One of the market’s most notable multifamily deals in the second half of the year was Carter-Haston Real Estate Services’ $77.8 million purchase of The Barton, a 229-unit luxury property in Clayton, Mo., from Covington Realty Partners. The buyer financed the acquisition of the 2018-built asset with a $50.6 million Fannie Mae loan from NorthMarq Capital.

1. Chicago

Rendering of Essex on the Park. Image courtesy of Oxford Capital Group and Hartshorne Plunkard Architecture

The largest metro in the Midwest takes the top spot on our list, with $1 billion in multifamily transactions through October. Despite Chicago’s position, investment has fallen considerably compared to the $2 billion in deals closed in the first 10 months of 2019. Transactions in the metro’s urban areas added up to more than two-thirds of total volume, a sharp contrast to the period in the previous year when suburban investment totaled close to 60 percent of overall volume.

ICONIQ Capital paid $190 million for the 479-unit Essex on the Park in the metro’s largest transaction of the year. Oxford Capital Group was the seller in the deal for the 56-story award-winning trophy asset, located at 808 S. Michigan Ave. in the Loop. The high-rise delivered in early 2019 and is Chicago’s first WELL Certified community.

Yardi Matrix covers all multifamily properties of 50+ units in size across 133 markets in the United States. This ranking reflects transactions for properties within that sample group.