Downtown Chicago apartments – the dark side of the boom

Crain’s Chicago Business raises the possibility that 2015 may be the year in which Chicago’s downtown apartment market reprises a Pink Floyd lyric:

For long you live and high you fly
But only if you ride the tide
And balanced on the biggest wave
You race towards an early grave.

According to Crain’s:

Downtown apartment landlords have 3,000 reasons to be worried about a coming glut.

Landlords have known for a while that more than 5,300 downtown apartments will be completed in 2013 and 2014, the biggest supply surge since at least 1990. But a new report is predicting another 3,000 rental units or more in 2015.

The math shows that supply and demand already are getting out of whack. Developers will complete an average of 2,679 apartments downtown this year and next, according to Appraisal Research. The consulting firm’s quarterly survey covers an area bounded roughly by North Avenue, Cermak Road and Ashland Avenue, and focuses on larger buildings.

But in the last four quarters, a key measure of demand, absorption—the change in the number of occupied downtown apartments—has totaled 975 units. Annual absorption downtown has averaged 1,348 units over the last three years, about half the increase in supply forecast in 2013 and 2014.

Crain’s view of “the math” is exceedingly simplistic. Historical absorption rates aren’t much of a guide to the future, since the market delivered fewer units during the past 3 years than are currently in the pipeline for this year and next.

A map accompanying the Crain’s article lists 40 completed, under construction and proposed projects in the downtown area. YoChicago’s at-a-glance list of new projects includes nearly two dozen more.