In a quick follow-up to our rising Chicago rents post, Ron De Vries, of Appraisal Research Counselors, points out that one key reason rents in Class B buildings are rising slower than those in Class A apartment towers is the boom in condo conversions during the past 12 to 18 months.
As top downtown buildings convert to condominiums, hundreds of apartments are taken out of the rental pool, shrinking supply. Renters looking for Class A properties (newer building, great location, lots of amenities) simply have “fewer alternatives to rent at this time” than those seeking apartments in Class B buildings (older building, second-tier location, fewer or aging amenities). And fewer alternatives almost always means a steeper price tag.
What’s the trend? During the first quarter of 2006, almost 1,700 rental units downtown were acquired for conversion, and Appraisal Research predicts more to come. Meanwhile, very few new rental towers have been built or are on the way.