Chicago Apartment Market Has Strong First Quarter 2014
On Monday, Crains Chicago Business published “Downtown Apartment Market on Fire in First Quarter,” detailing how the market is still going strong for the Class A multi-family properties downtown Chicago.
We’ve seen an incredible demand for brand new, luxury Chicago apartments this spring. We always like to delve into the numbers a bit further to help our clients understand what’s truly happening in the rental market.
Rents and occupancy are significantly up since the winter months, which is to be expected. It’s prime leasing season after all.
Year over year rental increases are stable at 2.7%. That means when renewing a lease in the current market, renters can expect a slight increase in their rent – no more than $50-$100 per month. If your property manager or landlord is increasing your rent any more than that, it’s time to move or fight to renegotiate the price.
The number that has everyone very excited is the net absorption total. This refers to the number of apartments being leased during the quarter. A typical first quarter absorption total has been about 500 units. The first quarter of 2014 saw over 1,000 rentals in the Class A properties. This is double the amount of a typical market.
Why did this happen?
There are two factors at play. The first is the strengthening job market. As more jobs are created in downtown Chicago, more people have moved here. They are renting the newest, nicest properties.
The second factor is the residential sale market has improved dramatically – allowing condo owners to sell their units and suburban homeowners to sell their homes and make the move downtown.
As condos hit the sale market, we’ve seen a significant decrease in the number of private condos for rent – driving more renters to the managed properties.
What’s happening now?
Keeping in mind this report comes out 45 days after the first quarter ends, here’s a sneak peek at what’s been happening in the second quarter of 2104.
Luxury Living Chicago Realty had a very strong April. Our company had the most successful month in the history of our brokerage. This was the sentiment across the industry.
However, May has been a bit quieter. The weather has been unseasonably cold and rainy, which deters people from looking for an apartment.
Pricing is higher. All of the property managers and developers looked at the strong first quarter numbers and April’s velocity and adjusted rents accordingly. Concessions, like one and two months free, are all but gone.
Another trend we are seeing is the bypassing of the June 1st move date. Historically, June was the busiest month to move. However, last year saw a pattern of 13, 14 and 16 month lease term deals to capitalize on concessions, pushing back early summer moves to later in the season.
Also, new construction was delayed due to the harsh winter. New properties are opening for occupancy in July and August versus June, giving people more time to look for their next apartment.
Ultimately, the second quarter should be strong, but year over year absorption numbers won’t be as dramatic as the first quarter.
It’s a great time to rent a downtown Chicago apartment.
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