Chicago’s downtown apartment market is robust, with developers catering to high demand by filling the pipeline with new projects over the next few years, according to housing analyst Appraisal Research Counselors.
Developers are expected to deliver 421 new units in 2007 and a further 1,976 new apartments in 2008, according to figures from Appraisal Research’s Chicago Residential Market Overview, released today.
On top of that, developers may deliver 2,347 new apartments in 2009 and 927 units in 2010, although not all of those new units may come to market, according to Ron De Vries of Appraisal Research. The figures are a dramatic increase for a market that averaged 775 new rental units a year between 1999 and 2006, De Vries said. Appraisal Research’s report covers a section of the city bounded by North Avenue, Cermak Road, the lake and Damen Avenue.
“There is a lot of stuff in the pipeline,” De Vries said. “We don’t want to panic, but it comes down to, what are you offering that’s unique?”
The development boom is inspired by a number of factors such as healthy demand for apartments – the average fourth-quarter occupancy rate in downtown Chicago stood at 94.3 percent in 2006 – along with solid growth in the number of professional and service sector jobs, De Vries said. Occupancy rates are healthy because the condo conversion boom of 2005 reduced the supply of apartment buildings in downtown Chicago, he said.
This summer, 421 new units will come onto the market at Kingsbury Plaza in River North. Projects delivering units in 2008 or early 2009 include The Tides, 1401 S State, Allure at K Station and 900 S Clark.
Developers have also announced plans to build six more buildings, several of which may break ground in 2007, De Vries said. He did not give anticipated delivery dates for the buildings, which include Randolph Tower, The Curve, Kinzie / Clinton, Streeter II, Aqua and 215 W Washington.
“Are every one of these deals going to happen?” De Vries said of the six buildings. “No – but they have a good chance.”
In 2006, rents in Class A buildings (defined as luxury and newer buildings), averaged $2.20 per square foot. Some building owners would likely increase rents between 4- and 6 percent in the spring, De Vries said.
Among the large rental buildings delivered in 2006, 55 percent of the 326 market-rate units at the South Loop tower Sky55, are leased. The Streeter, which has 481 apartments, is 48 percent leased after five months on the market. Rental prices in both buildings come in around $2.23 per square foot, DeVries said, noting that the price includes utilities at The Streeter, but not at Sky55.
Fifield Companies’ Left Bank, the first apartment high-rise in its West Loop mixed-use development Kinzie Station, opened for business in November, and 17 percent of the 451 units are leased.
The level of finishes in apartments is more sophisticated than it was a few years ago, DeVries said.
“The new standard in the rental market is … granite (countertops) and black or stainless appliances.”