Amancio Ortega, the billionaire founder of Zara and primary shareholder of Inditex, has rekindled his real estate investments in the United States by acquiring the luxury residential tower, 727 West Madison, in Chicago for $232 million through his investment entity, Pontegadea. This mirrors a growing trend among affluent individuals who are shifting their focus from traditional office property investments to the US rental market. The pandemic has underscored the significance of rental housing due to remote work and higher office vacancies all this coupled with challenges in the commercial property sector shows that ultra-wealthy individuals and their companies have substantially increased their involvement in multifamily housing investments over the past decade.
The luxury residential tower, 727 West Madison, located in Chicago's West Loop neighbourhood, now belongs to Amancio Ortega, the billionaire founder of Zara. The founder and primary shareholder of Inditex, has reinitiated his real estate investments in the United States. Through his investment entity, Pontegadea, he has acquired a residential tower in Chicago for $232 million (approximately €212 million), aligning with a trend of wealthy individuals investing in the US rental market.
The building comprises 492 apartments, including studio, starting from one and goes up to three-bedroom units, with sizes ranging from 490 to 1,550 square feet. Standing at just under 500 feet in height, the property offers various amenities such as a sky lounge, media theatre, coffee bar, coworking area, and conference facilities. Residents can enjoy a fitness centre, yoga studio, outdoor pool, spa, dog park, and even a pet spa. Additionally, the ground floor features amenities like a Pilates studio, an AT&T Store, and a Chase Bank branch. Rental prices start at $2,166 per month for a studio and go up to $6,083 for the most luxurious three-bedroom apartment available.
In the last ten years, the ultra-wealthy and their companies have significantly increased their investments in apartments, particularly in the sector referred to as multifamily housing in the United States. This trend is highlighted in research conducted by Knight Frank.
Presently, a considerable number of these investors are optimistic about their chances of securing favourable deals due to the decline in apartment building prices during the recent commercial-property slump. Simultaneously, the widespread housing shortage indicates promising prospects for rental incomes in major cities in the long run.
At the beginning of this year, a real estate company headed by Israeli billionaire Eyal Ofer acquired a 57-unit apartment building located very close to Manhattan's Gramercy Park. Meanwhile, one of the wealthiest families in Latin America is actively searching for opportunities to purchase multifamily properties as they aim to enter the US real estate market.
In late 2022, an investment firm supported by David Rubenstein, a co-founder of Carlyle Group Inc., successfully raised funds from affluent investors worldwide with the intention of acquiring apartment buildings and logistics properties.
Real estate has remained a popular asset class among the affluent due to its potential for steady income and tax benefits. According to a UBS Group AG survey of 230 investment firms, family offices allocated around 13% of their investments to real estate in 2022. Notably, more than a third of these firms have plans to increase their investments in the real estate sector over the next five years.
Apartment buildings have become considerably more affordable in recent times. The surge in borrowing expenses that began in early 2022 has exerted downward pressure on property values and impeded transaction activities. In the United States, prices have declined by 16% in August compared to the same period last year, as reported by the real estate research firm Green Street.
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