Marcus & Millichap’s 2012 National Apartment Report (PDF, registration required) just became available online. The report summarizes information about apartment markets in 44 large US markets.
The outlook for Chicago:
Completions will increase, but tenant demand will grow at a faster pace, reducing vacancy in Chicago for the third consecutive year in 2012.
Occupancy and rents will strengthen throughout this year as newly employed residents move into rental housing, but the progress of developments through the supply pipeline will limit additional declines in vacancy beyond 2012.
Approximately 15,000 rentals were planned in the metro at the end of last year, an amount that would expand rental stock 3.4 percent if all of the projects come online. Planned rentals in the Loop would expand stock by 15 percent, while the Gold Coast faces a potential 9 percent increase in rental stock.
City locations will remain primary targets for developers, due to the expected migration to urban areas by young residents entering the work force.
Marcus & Millichap expects asking rents in the Chicago market to increase 4% and effective rents to increase 4.8%. The vacancy rate is expected to decline by 50 basis points, to 4.2%, following a 90-basis point drop last year.
Despite these favorable conditions, Chicago’s ranked as only the 17th most attractive on the National Apartment Index (NAI). What’s the NAI? According to Marcus & Millichap Real Estate Investment Services:
The NAI ranks 44 major apartment markets based upon a series of 12-month, forward-looking economic and supply and demand variables. Markets are ranked based on their cumulative weighted-average scores for various indicators, including forecast employment growth, vacancy, construction, housing affordability and rents. Weighing both the forecasts and incremental change over the next year, the index is designed to indicate relative supply and demand conditions at the market level.