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“[New South Loop apartments] have hit the market at the worst time… If you want to live in the South Loop, you have lots of options. That has really slowed down the leasing.”
- Appraisal Research Counselors vice-president Ron DeVries, speaking to Crain’s about the state of the downtown rental market. Rents in downtown Class A buildings dropped to an average of $2.11 per square foot in the fourth quarter of 2008, down from $2.25 in the third quarter, due in part to more landlords offering one or more months free, according to Appraisal Research’s latest downtown benchmark report.
Apartment occupancy in Class A buildings has hit a six-year low, due in part to new competition from the neighborhood’s new condo towers, according to the Crain’s article. Developers are in the process of adding 3,200 units to the South Loop alone, and many of those units are returning to the market as rentals with “good deals.”
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{ 17 comments }
Is it a fair analogy to say that the South Loop is the “Miami of Chicago?” (i.e. rampant over-building, price appreciation, and condo speculation buys during the boom, and therefore has a very long way to fall in the bust)
This may be overstated, but was wondering others’ thoughts.
Short term maybe, but long term I would strongly disagree.
Yes, the South Loop blossomed during the housing boom (similar to Miami), but that doesn’t mean it’s the ‘Miami of Chicago’. You’re comparing an entire city to a specific neighborhood within a city.
According to recent reports, home prices in Miami fell approximately 30% YTD. Has the South Loop experienced similar drastic declines? According to the Tribune, the South Loop (aka near south side) was one of a couple neighborhoods in the city to actually see the median home prices INCREASE this past year.
However in the short term, the South Loop will struggle (but tell me a city/neighborhood that isn’t). There are a lot of high-rises that are delivering units this year and that won’t help. However, almost all other projects have been canceled or postponed for 2010 and beyond. As a result the demand will eventually catch up with the supply.
Let’s also not forget why the South Loop grew in the first place…location.
How many other neighborhoods have similar access to the lake, grant park, museums, soldier field, the loop, restaurants, public transportation, major highways? I could go on…
I understand peoples desire to compare Miami and Las Vegas to the South Loop, but it’s really not a fair comparison. Compare Miami to Phoenix or Houston.
If you want to compare the South Loop, compare it to Soho, Chelsea or Harlem in New York. These areas had similar booms to the South Loop. Although they may not be in as good as shape as the upper east/west sides of New York or comparably the Gold Coast in Chicago, they’re desirable neighborhoods in a large, dynamic cities. As long as Chicago and New York remain viable global cities, these neighborhoods will be well positioned for the long term (unlike Miami and Vegas).
Well said Sloopin, I just don’t get it when people try to compare the south loop to Miami. As long as Chicago stays an attractive City the South loop will be fine in the long term.
Sloopin, John,
Your take on what time frame defines the “long term?”
I think the south loop is more like the financial district than Chelsea et al in that it has a huge new number of residential units and little existing residential development – or some areas in Brooklyn.
From their posts I am gathering “long term” to mean after 2010, when South Loop new supply slows and inventory drops a bit.
Thanks for the reply, Sloopin.
Seems like your understanding of the dynamics of the area are strong.
Joe, I don’t know if I can easily quantify my definition of ‘long term’, but generally speaking I think the positive attributes of the neighborhood position it well for the future.
In my opinion 2009 and 2010 will be difficult. After that it’s really hard to tell given the current economic mess. I’m not an economist, so I’m not going to try to hypothesize when the country is going to come out of this funk.
Perhaps the biggest wild card for the South Loop (near south side) in the short term is the cities Olympic bid. Although I think the neighborhood is well positioned regardless, if the city does win the Olympics it would speed up development and infrastructure improvement in the South Loop again. Will we win the Olympics? Obviously that’s a big if…
Sheriden B, I think the financial district is also a fair comparison (much better then Miami or Vegas). I chose the areas in NYC based on similar neighborhood characteristics that I’ve noticed in the South Loop.
Harlem is a historic, diverse neighborhood close to the under utilized north end of Central Park. Soho (and the surrounding east and west villages) have a large concentration of urban college students (the South Loop has the growing Columbia campus, as well as many other colleges). Parts of Chelsea have a lot of old industrial buildings that have recently been converted to lofts (again similar to various areas in the South Loop and Printers Row). But you’re right the Financial District and parts of Brooklyn also are fair comparisons and in my opinion are also well positioned for the ‘long term’.
sloopin,
I don’t think there’s a direct comparison with any NY neighborhood. The residential development in the Financial District is very thin compared to the scale of activity in the South Loop – just a few major buildings – and it’s as much rental as condo.
I paid close attention to the situation in the FD since my daughter recently moved to NY – and wound up at 9th & 5th in the Village. Rents were very attractive by lower Manhattan standards and the landlords were dealing heavvily. The amenity base was way too scarce in the FD for it to be a viable residential area at this point in time. It would have been similar to living in the Loop 20 years ago.
Downtown LA might be a better comparison to the South Loop. That market, as has most of LA, ahs declined sharply since the article I linked was published.
Actually, I think the FD is an apt comparison (far more so than Harlem) – I think the residential unit count has doubled in the last ten years and has become, in fact, a major family destination.
you can’t compare The south Loop to dowtown LA, they have nothing there I would not even compare it to Downtown LA.
The South Loop has attraction all around it.
I work in LA and Chicago I spend 1/2 my time in the LA area, I would compare Downtown LA to maybe Detroit, ask anyone in LA if they ever go to downtown LA nobody does just like Detroit they have nothing.
You guys can specualte all you want but lets chat again in 3-4years and see.
In my opinion the south loop has so many attraction around it and that alone will keep on bringing residents in the area once the market recovers and by the way the prices are affordable to the average chicago resident.
Time will tell…..
John,
Downtown LA has nothing? What about LA Live? The Staples Center? The convention center? The Disney Center? The nearby fashion district? The loft conversions? The half-million people who work there? The restaurants that far outnumber those in the South Loop? The easy proximity to lots of LA attractions j-including Dodger Stqdium – via all the freeways that intersect downtown? The subway?
Downtown LA is not Detroit by any stretch. I’ve spent a lot of time there over the last 10 years (the LA Times is a major client of our firm) and see many similarities with the South Loop.
Ok whatever you say any person who lives in the LA area only goes there for a game at the staples center at best thats what my friends and I do just like Detroit.
In the south loop I can walk to the museum The lake or Grant park.
I think you just have something against the south loop and wants it to fail.
Like I said before time will tell.
I have nothing against the South Loop, John. What do you have against downtown LA?
Ok Joe,
the difference with LA, I can actually walk at night in the south loop or anytime during the day.
I dare you to walk safely dowtown LA around the staples center when there is no Games.
I just don’t think its a fare comparison.
John,
I’ve never walked “around” the Staples center on a non-event evening, but I have walked from the Hilton Checkers and the Biltmore to The Palm, which is a block from the Staples. It’s as pleasant a walk, if not more so, as you’ll find in the South Loop.
You won’t find anything like LA Live in the South Loop, or the steak houses you’ll find in downtown LA.
I’ll grant you that it can get pretty creepy around Pershing Square at night or anywhere toward the eastern edges of downtown, for that matter. I’ve walked almost all of those stretches, at night. The legions of homeless don’t terribly concern me. The atmosphere is very much like wher I grew up, except that we didn’t have homeless back then.
There are parts of the South Loop where, I’d guess, you wouldn’t venture at night.
In any event, the point wasn’t about whether one area was better than another. It was simply that you can find many similarities between the South Loop and LA: physical characteristics, walk-to-work locations, cultural institutions, rocket-like increase in the housing stock in the past 8-10 years in areas that had limited housing stock before that, and what is currently a supply / demand imbalance. The similarities are great.
I Understand your point but lets look at DownTown LA and Vegas the prices have already started droping by a large amount, meanwhile we have yet to see these drops in the southLoop, not to say it will not happen.
In my opinion in the long run 4-5 years the South Loop will be fine theres plenty of attraction around it.
Personally I would never move Downtown LA not in a million years, the only place In CA that has the same walking distance attraction/public transport like the south loop in San Francisco, nobody walks in LA they drive everywhere to me thats not a city its a giant Suburb.
By the way when People say LA they mean Hollywood, Beverly Hills, OC not Downtown LA.
John,
We’re in agreement that the South Loop will be fine in the long run.
.
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