Chicagoland Apartment Association 2017 Preview Event
On Friday, October 7th the Chicagoland Apartment Association (CAA) hosted the 2017 Apartment Industry Outlook Preview Event. This annual event provides apartment owners, managers, and developers with valuable insight and information on current and future market trends in Chicago’s rental market. This event begins bright and early at 7:30am with a networking breakfast and continues with several speakers, including JP Morgan’s senior economist, a Q&A session with an Owner’s Panel, and a Market Forecast by Appraisal Research Counselors.
James Glassman, a respected economist, spoke about the correlation between lender interest rates and unemployment rates and their impact on rental demand. The overall forecast was encouraging as news of corporate headquarters relocations to downtown Chicago continue to make the news. This transition to downtown will bring new employers to downtown Chicago and overall increase apartment demand. This demand will assist in the absorption of the thousands of units still to come to the city’s skyline. Read more about the pipeline in Luxury Living Chicago Realty’s 2016 Chicago Apartment Guide.
The Owners panel at the CAA Outlook Preview Event always provides an interesting discussion. Panelists come from a variety of backgrounds offering diverse perspectives. Alex Samoylovich, Co-Founder & Managing Partner of CEDARst Companies / FLATS Chicago, focuses on micro units in the neighborhoods, while Anthony Rossi, President of RMK Management Corp., is focusing on new construction highrise developments in Wrigleyville and River West. A general takeaway from this dialogue was the growing concern of increased construction costs and the impact of the new Affordable Requirements Ordinance (ARO). These two concerns were discussed as being challenging due to the impact they have on development costs making it more difficult to make deals feasible. These concerns along with the potential reluctance of lenders to provide loans to ‘another River North high rise’ as Laramar’s President Jeff Elowe mentioned, makes the job of developers ever so challenging. Mary Ellen Martin, Executive Vice President of Morningside Equities Group, Inc., also expressed concern over the state of Chicago Public Schools and the trend for renters to move towards the suburbs for better education opportunities.
Concluding the event was the Vice President of Appraisal Research Counselors, Ron DeVries. He confirmed that the Class A downtown market, has seen a 3.7% PSF increase year over year in Class A product and a 3.9% PSF increase in the Class B product providing evidence that rents continue to rise in the downtown market. Mr. DeVries also discussed the neighborhood apartment development that is being seen throughout Chicago.
With near north and northwest neighborhoods embracing the density that multifamily developments bring to nearby businesses and their communities, developers are finding opportunities to achieve high rental rates in niche neighborhoods. With the ever-changing pipeline of development, tax implications and ARO regulations, developers will be testing their patience and pocket books as future developments become more challenging in the years to come. We remain optimistic that businesses will continue to move downtown impacting the demand for rental product and that the job market continues to recover putting people to work in a more competitive environment.
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