You’ve seen the construction cranes around town and you’ve heard the stories of skyrocketing rents so what does it all mean for the Chicago rental market? Can rents continue to rise at a blistering pace at the same time that they are adding a ton of supply to the market? To answer these questions I went to my friends at Apartments.com and their parent company CoStar who provided me with some great information on Chicago rental market trends. Unfortunately, I did not get to talk to Brad Bellflower.
Let’s start with an article that appeared in Crain’s back in May: How High Can Downtown Chicago Apartment Rents Go? The article has a couple of great graphs that show downtown Chicago rents rising more than 42% since 2002 but they lost a lot of ground during the recession. However, since the bottom in 2009 rents of class A apartments are up 37% and in just the last year they are up 5.6%.
Notice also that there has been a steady increase in the supply being added each year but that during this entire period the occupancy rate has been more or less stable between 92 – 96%. In other words the new supply has been totally absorbed.
The CoStar/ Apartments.com folks provided me with a list of some of the developments that are going to be coming online downtown soon.
They also looked at the supply/ demand dynamics across the entire metro area and, as you can see, the vacancy rate has been plummeting despite a steady stream of new supply coming online. The suburbs have apparently been an even more attractive environment for landlords than the downtown area since lower vacancy rates translate to larger rent increases.
Looking across the entire metro area Apartments.com has plotted rent increases in the map below. The highest rent increases – in absolute dollar terms – have been downtown and far north. However, downtown Chicago has higher rents to begin with so you would expect rents there to increase more in absolute terms.
The big question though is what impact the increasing supply downtown will have on rents. You would think it would keep rents down but that doesn’t seem to have been the case thus far.
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Gary Lucido is the President of Lucid Realty, the Chicago area’s full service discount real estate brokerage. If you want to keep up to date on the Chicago real estate market, get an insider’s view of the seamy underbelly of the real estate industry, or you just think he’s the next Kurt Vonnegut you can Subscribe to Getting Real by Email. Please be sure to verify your email address when you receive the verification notice.