Record Demand in 2018 for Apartments in Chicago
At Luxury Living Chicago Realty we market, lease and sell Chicago luxury apartments and condos. In 2018, our team was responsible for renting 2,000 apartments in Chicago with an average market price of $3000. Our team of brokers and leasing agents impressively leased 40% of all new luxury rentals in the city either through our exclusive lease-up engagements or placing our clients at one of the new construction Class-A properties in the city.
Our team attended the Bisnow Multifamily Annual Conference Midwest 2018 in Chicago at the Zhou B. Art Center in Chicago’s Bridgeport neighborhood and the message was clear: Demand is still very strong for Chicago apartments.
As we near the end of the year, Costar Data is reporting a record number of apartments were delivered and absorbed in 2018. In the first three quarters of the year, 9,500 units were absorbed, while 7,000 new apartments were delivered. Not surprisingly leading the charge in absorption and delivery are the Class-A luxury apartments in downtown Chicago.
What is Continuing to Drive Demand for Chicago Apartments?
1.) A Tight Job Market
Chicago’s job market has continued to improve with an uptick in job growth year over year. The labor market continues to grow stronger with job growth spread out across the entire economy and different sectors of the labor market versus a handful of industries.
We’re keeping our eyes on the race to land Amazon’s new headquarters, with Bisnow reporting recent follow-up visits to top city contenders including Chicago. If Chicago is able to land this technology giant, it will be game-changing for Chicago real estate.
2.) A Positive Change in Chicago’s Population
While the latest news reports would lead you to believe the population of Chicago is declining, this is only true for certain segments of the city. There is strong growth in Chicago’s population, especially in the downtown core (i.e. River North), the Northside (i.e. Lincoln Park) and the west (i.e. West Loop, Logan Square, and Wicker Park).
3.) Renters By Choice
The other contributing factor to the strong demand for Chicago apartments is we have not returned to an environment of home ownership. Millennials make up 80% of new household formations and this generation still overwhelmingly prefers renting over buying. According to recent data from Zillow, the median age of a first time home buyer is 34 years old, indicating Millennials, and the up and coming Generation Z will be a renter nation for a long time to come.
Rental Growth Continues to Accelerate
When it comes to rental growth or the price of apartments, there is good news for both renters and Chicago apartment developers.
First, rent growth experienced a re-acceleration in 2018, with pricing continuing to trend upwards. Costar expects this trend to continue, which is positive for apartment developers. However, do expect seasonality to play a part in pricing fluctuations during the year as Chicago is the most seasonally impacted market in the country. Luxury Living Chicago Realty can attest to this as we are currently feeling the effects of this phenomena and do every year. However, we also anticipate pricing to trend upwards as we move into the first and second quarters of 2019.
Secondly, apartment concessions are real and will remain in place as Chicago continues to see a surge in supply. This is good news for renters who have grown used to receiving some sort of concession when renting. Costar is reporting 35% of apartments currently for rent have some type of concession, whether it’s a month free, or some other financial incentive for the renter.
How Long Will This Trend Last?
There are currently 17,000 new apartments under construction in the city, with 4,000 of those units breaking ground in late 2018.
By Costars expectations, it will take eight to 12 quarters to absorb all of this new construction. The Luxury Living Chicago Realty team is excited about the future and we’re here to partner with Chicago renters and developers to help them navigate the apartment search and leasing experience and achieve their goals.
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