Multifamily Investor | Midwest Market Growth with Brad Chambers

When it comes to identifying strong real estate markets, the Midwest is emerging as a prime destination for investors. With robust supply-demand dynamics and a growing recognition of the region’s potential, the Midwest offers compelling opportunities—especially in multifamily housing. Brad Chambers, President and CEO at Buckingham Companies, recently shared his insights on what makes these markets stand out.

Demand Drivers: Job Growth and Onshoring

“What drives rents and values are supply and demand,” says Chambers. For the Midwest, demand is being fueled by significant job growth, much of it tied to onshoring efforts by major corporations.

“Intel is building a $5 billion plant, and Eli Lilly is developing another multi-billion-dollar facility in our hometown,” Chambers explains. These investments are creating hundreds of thousands of jobs—260,000 in 2022, increasing to 325,000 in 2023. In addition, clean energy and clean vehicle jobs in the Midwest reached over 761,000 in 2023, marking a 3.9% increase from the previous year (Clean Jobs Midwest). This influx of employment not only boosts local economies but also generates a growing need for residential housing to support the workforce.

Reframing the Midwest: Flyover to Fly-To

Historically overlooked by coastal investors, Midwest markets are now being recognized for their stability and resilience. “People used to call these 'flyover cities,'” says Chambers. “Today, they’re fly-to cities.”

One key reason for this shift is the Midwest’s ability to deliver returns comparable to coastal markets. According to Chambers, “The Midwest has historically delivered the same returns as coastal markets. However, while coastal markets derive 75-80% of returns from cap rate compression or residual value, the Midwest derives 50% from current returns.” This consistent cash flow appeals to investors seeking diversification and steady performance. Supporting this trend, the Midwest boasts the nation's lowest unemployment rate at 3.2% as of May 2023 and the highest prime-age employment-to-population ratio at 81.9% in 2022 (Economic Policy Institute).

Rental Growth Trends

Another advantage of the Midwest is its strong rental growth. While many markets across the country are experiencing negative growth rates, the Midwest continues to see rental increases of 3-5%. “Slow and steady wins the race in Midwest markets,” Chambers emphasizes. This steady growth underscores the region’s appeal as a reliable investment destination.

In 2023, while the U.S. logged a modest annual rent growth of 0.3%, the Midwest achieved increases exceeding 2% (RealPage). Furthermore, metropolitan areas like Columbus, Ohio, and Minneapolis, Minnesota, saw year-over-year rent increases of 9.33% and 9.24%, respectively, as of August 2023 (BDC Network).

Why the Midwest Matters

As more investors recognize the unique strengths of the Midwest, its reputation as a premier market continues to grow. From job-driven demand to stable returns and resilient rental growth, the region offers a winning formula for real estate investment.

At Buckingham Companies, we’re proud to be at the forefront of this Midwest momentum, helping investors capitalize on the opportunities in these thriving markets.