Move over Austin, there’s a new city topping the growth charts.
One of the biggest real estate stories of the decade so far has been the remarkable draw of the South and Southwest. Since 2020, huge numbers of people have packed their bags and relocated to cities like Austin, Nashville, Miami, Charlotte, and Phoenix, and made the Sun Belt a real estate gold mine. However, recent trends show the wind blowing in a more northerly direction.
In the second half of 2025 Chicago has emerged as the latest darling of investors in multifamily properties. A sharp shift in investor sentiment and strong market fundamentals that contrast with many traditional high-growth Southern metros have some referring to the Windy City as “the new Sun Belt.”
Chicago landlords had a good 2024 but the city’s current rise to the top of the heap was not inevitable a year ago. So, how is Chicago managing to outperform expectations and so many other cities in 2025?
Rent Growth Outpaces Sun Belt and National Averages
Chicago is leading the nation in rent growth for multifamily real estate with year-over-year increases between 3.8% and 5.5% as of mid-2025. In some submarkets like the Loop and West Loop, rent growth is even higher. These rates are outpacing growth in traditional hubs like Los Angeles, San Francisco, and New York, as well as Sun Belt cities like Austin and Nashville.
This stands in stark contrast to the situation in warmer climes where many cities appear to be victims of their own success. Years of turbo-charged population growth in the Sun Belt has led to rampant construction causing an oversupply of housing and ballooning vacancy rates. Rents have fallen and, in some places, fallen precipitously. In Naples, FL, for instance, the rental growth rate is -7.5% year-over-year.
Soaring Demand, Limited Supply, and Construction Slowdown
Demand for housing in Chicago is currently through the roof. Folks priced out of coastal hubs—young professionals in particular—have begun looking to the Midwest metropolis as an affordable alternative and arriving in droves. The city gained over 100,000 new residents in the last two years alone. Naturally, this influx has put extraordinary pressure on multifamily housing supply and created a fiercely competitive rental market where bidding wars are increasingly common.
Meanwhile, housing inventory looks like it will only get tighter in the near term. Construction of new multifamily units in Chicago has actually slowed drastically, with only 4,200–5,000 units projected to be delivered in 2025—about 50% below the decade-long average.
The supply-demand imbalance in Chicago has slashed vacancy rates across the city, including neighborhoods that are historically less sought-after. Overall, the Windy City’s vacancy rates are now among the lowest in major U.S. cities—down to 4.7%, and even lower for Class B/C properties.
Strong Investor Demand and Rising Sales Activity
These strong performance indicators have shifted investor sentiment in favor of Chicago in a big way over the last several months. Institutional and private capital is being redirected from overheated Sun Belt markets to what are now perceived to be more stable, yield-driven Midwest metros. In the first half of 2025, Chicago saw multifamily investment sales double year-over-year, with Class A sale prices jumping by 33%.
The city proper is, of course, seeing plenty of the action, but investors are casting a wide net in the Chicago metro area. The surrounding suburbs have seen a staggering 65% YoY surge in multifamily transactions. Part of the explanation for this surge comes down to the city’s incredibly tight housing inventory, although plenty of investors are also seeking value in more favorable property tax environments outside Cook County.
Market Stability and Demographic Tailwinds
Demand for rentals in Chicago has been buoyed by a tight ownership market. Plus, Chicago’s population has grown by over 100,000 in two years, with young professionals making up a large proportion of these new arrivals. Driving this particular migration trend is the fact that the Windy City is comparable in many ways to coastal metros, but with housing costs that are still attainable for those on more entry-level salaries.
As an alternative to cities like NYC or San Francisco, Chicago is an obvious choice for a few reasons. One of the biggest is culture. Chicago is an iconic major American city with a dynamic mix of old and new architecture, a renowned culinary scene, legendary sports franchises, a diverse population, good public transport, and a real sense of history. The up-and-coming cities of the Sun Belt, by contrast, are generally smaller, less established, and so rife with new development that to some they can lack a distinct sense of place. To those seeking a more gritty urban vibe, the Midwest offers a lot of what the Sun Belt simply cannot.
Another of Chicago’s primary draws is its economy. Job growth in Chicago over the last several years has been slow but steady. Growth in Southern metros, meanwhile, has seen recent dips after experiencing big spikes. Plus, the local economy is highly diversified, which insulates the real estate market from sharp downturns.
Sun Belt Market Cooling
The once scorching rental markets of the Sun Belt have cooled significantly in 2025 due to oversupply. Southern cities are struggling with vacancy rates that are in some cases more than triple Chicago’s. Austin, for instance, has a vacancy rate of 15.3% compared to Chicago’s 5%.
This has pushed capital to Midwest “fortresses of stability,” where strong rent growth and tight vacancy are now the exceptions nationally. Chicago is increasingly seen as one the safest cities in the U.S. for multifamily investors to put their money.
What’s Driving the Sentiment Shift?
Investors are re-rating Chicago not just for value or yield, but for resilience.
Reliable growth and diverse investment options are two of the city’s standout assets. Rates of occupancy and rent growth in Chicago have consistently proven strong while other parts of the country have seen more volatility. Plus, the metro area’s suburban-urban bifurcation offers multiple strategies for different types of buyers.
Ultimately, risk mitigation is the major factor driving capital to the shores of Lake Michigan. Investors are increasingly concerned about Sun Belt volatility, recent oversupply, and flat or negative rent trends. Chicago, meanwhile, is seen as far more stable. Its long history of relative predictability and healthy fundamentals are especially appealing to both institutional and private investors, and its current accelerated growth trends certainly don’t hurt either.
Market headlines describe the current scene in Chicago as the Midwest’s “moment in the multifamily spotlight,” with strong local and out-of-state buyer demand testing the upper limits of asset values and listing activity.
The Next Chapter for Chicago Multifamily
Chicago is not becoming the Sun Belt in climate or culture, but in multifamily investment appeal and fundamentals, it is absolutely occupying the attention and confidence of the real estate capital that two years ago was almost exclusively chasing Southern markets. With contained supply, steady rent growth, and stable demand, Chicago now stands out as one of the country’s best-performing and most sought-after multifamily markets.
Multifamily Investors Positioned to Thrive with Boutique Property Management
Multifamily investors in the Chicago area can position their portfolios for success by partnering with a boutique property management firm like Evernest. Specializing in on-site and scattered site property management services for small and mid-size buildings, Evernest property management handles leasing, maintenance, and more. Backed by the resources of a national brand with local boots on the ground, Evernest property managers are already helping Chicago multifamily investors strengthen and protect their real estate portfolios. If you’re interested in learning more about managing a multifamily property with Evernest, click to learn more.
