A news release from the Chicagoland Apartment Association (CAA) included the following summary of a presentation by Ron DeVries, vice president of Appraisal Research Counselors, at a recent CAA event.
Despite industry optimism, DeVries said the upward spiral of apartment rents in newer luxury downtown Chicago high-rises has ebbed after several years of hefty increases.
“Rents downtown are not rising as fast as last year. The market has slowed down,” DeVries said. Average rents for Class-A luxury rentals downtown increased to $2.64 per square foot in mid-2013, up only 2.7 percent from $2.57 per square foot in mid-2012.
Class-B buildings downtown posted average rents of $2.33 per square foot in mid-2013, up 5 percent from $2.22 per square foot in mid-2012.
“Some Class-B landlords are trying to transform their properties into A-minus buildings by adding new hardwood floors, in-unit washer/dryers, new kitchens and upgraded common-area amenities,” noted DeVries.
However, with a high-rise apartment building boom underway downtown and inventory growing, DeVries noted that occupancy levels have slipped to 93.7 percent in mid-2013 from 95 percent a year earlier. Most of the vacancies are in the Class-B building sector. Citywide apartment occupancies are still at a record-high 96 percent.
Appraisal Research noted that 8,500 new rental units are in the pipeline. Some 3,000 luxury apartments are scheduled for delivery in 2013, with another 2,500 units set to arrive in 2014, and 3,000 more coming in 2015.
“We’ve never delivered this many apartment units over a three-year period,” DeVries said. “Oversupply could push occupancy rates down to the 90-percent mark in some sub-markets.”