Chicago Multifamily Market Report – June 2023

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Chicago Multifamily Market Report – June 2023

Chris Nebenzahl

Chris Nebenzahl

MSA Thumbnail Chicago
Chicago Dominates the Nation in Multifamily Performance in 2023

While many markets have struggled with new supply and softening multifamily fundamentals, Chicago has risen to the top of the national rankings for nearly all major multifamily metrics. According to Radix, net effective rent is up 5.7% year-over-year as of early June, making Chicago the fastest growing rent market in the nation by a significant margin. Occupancy in the Windy City is also up 23 basis points on an annual basis, the only market nationwide to register occupancy gains in the past 12 months. While both headlines and data show signs of outmigration and declining population in Cook County and the Chicagoland area, the metro’s apartment market remains resilient. Diving deeper into the data shows there is a major divergence between the urban core and suburban Chicago, as the market’s outsized growth is driven mostly by downtown submarkets. Suburban areas on the other hand continue to struggle with traffic and rent growth compared to their urban peers. This is unique to Chicago as the trend is reversed in most markets, with suburban submarkets far outperforming the urban core. The new supply pipeline is active, but not overly robust and deliveries will likely be absorbed without too much impact on the market. The majority of new supply is delivering in areas of high demand, which should keep Chicago balanced from a fundamental perspective.
MSA Market Snapshot Chicago
Radix Rent and Operating Performance

Chicago leads all markets in rent and occupancy performance on an annual basis. It also ranks within the top three markets for average traffic and in the top 10 for new leases signed. By all accounts, the Chicago apartment market is on a roll. Even as nationwide fundamentals have plateaued in recent weeks, Chicago’s apartment market continues to grow, indicating continued demand for housing as we approach the mid-way point of 2023.

Traffic and Leasing

  • Chicago apartments are averaging 11.2 tours per property per week, which is nearly two and a half tours higher than the national average.

  • Dense urban submarkets including the Loop, Gold Coast/River North, Lincoln Park/Old Town and City West dominate traffic. These submarkets are averaging more than 13 tours per property per week. The Loop is leading all submarkets with nearly 18 tours per property per week.

  • While the urban core submarkets are seeing the most traffic, recent gains have been made in the suburbs of Aurora/Naperville and Glen Ellyn/Wheaton. Both submarkets have seen traffic increase by at least two tours per property per week over the past month.

  • The increase in traffic is leading to leases in Glen Ellyn, as the submarket leads the metro with properties averaging 4.7 new leases signed per week. The Loop and Gold Coast/River North are also putting up strong leasing numbers as the average property in each submarket is signing more than 4.5 new leases each week.

  • The urban vs. suburban divergence shows up in nearly all operating metrics as the weakest traffic is in O’Hare, Glenview/Evanston and Wheeling. These submarkets with the addition of Glendale Heights/Lombard are also the submarkets with the lowest leasing activity.

Chicago Traffic and Leases
Source: Radix

Occupancy and ATR

  • Nationwide, occupancy has been on a steady decline from the Fall of 2021 through the beginning of 2023 in almost every market. Demand softened and new apartments continue to be delivered, putting additional pressure on occupancy rates. Chicago, however, remains the one market where occupancy has risen on a year-over-year basis. Not only is occupancy increasing, but the metro has 13 submarkets with average occupancy already above 95%.

  • Occupancy is the one metric where the suburban submarkets outperform their urban peers in Chicago, likely due to new supply being delivered at a much faster rate in the urban core.

  • Aurora/Naperville, East Lake County and O’Hare submarkets have the highest occupancy in the metro, as each submarket maintains an average occupancy rate of at least 96.3%.

  • While demand is highest in the urban core, these submarkets also have the most units available to rent. The Loop, City West and Lincoln Park/Old Town have the most available units per property across the metro. Given the demand in the downtown submarkets, the above average ATR numbers are not very troublesome to property operators.

Chicago Occupancy Rate
Source: Radix

Net Effective Rent and Concessions

  • Chicago’s rent growth leads the nation as our same store sample in the Windy City has recorded net effective rent growth of 5.7% over the past 12 months. The next closest market is Charleston, at just 4.6% annual rent growth.

  • Once again, the urban submarkets have led the way, as net effective rents in Lincoln Park/Old Town and the Loop are up 9.4% year-over-year.

  • All but 2 submarkets across the metro have seen rents rise in the past year. South Shore rents have fallen 70 basis points, while East Lake County rents are down 4.5%.

  • On a more recent basis, O’Hare and Gold Coast/River North rents are both up more than 4% in the past month.

  • Studios lead the way, as rents have increased 8.7% for the smallest unit type across the metro. Larger units have not performed as well, yet two- and three-bedroom rents are still up 3.7% and 3.8% respectively.

  • Not surprisingly, concessions are down across the metro. Several submarkets are offering no concessions while other submarkets have had concessions cut in half or more in recent months.

Chicago Net Effective rent
Source: Radix

Employment Trends 

  • Chicago has long been the capital of the Midwest and one of the largest economies in the nation. It has a highly diversified economy and is a leader in the financial services, education, medical, technology and trade, transportation, and utilities industries. It also has one of the largest workforces in the country.
  • Job growth has been strong and steady over the past year, as the metro has added nearly 100,000 jobs across a variety of sectors.
  • The unemployment rate is higher than the national average, however it has been trending down over the past few months and is currently 4.3%; a rate below the threshold most economists would consider for full employment.
Chicago New Job Formations
Source: Bureau of Labor Statistics
Chicago Unemployment Rate
Source: Bureau of Labor Statistics

New Supply

  • There are roughly 550 projects in various stages of the new supply pipeline in Chicago. While most of the projects are in planning and may drop out of the pipeline as rising interest rates have made construction projects harder to pencil, there are still 151 projects currently under construction in the metro.

  • Most are concentrated in the urban submarkets, with major new projects delivering in the Loop, Gold Coast/River North and Lincoln Park. There are also a handful of projects scattered around the southern and western suburbs.

  • When considering the projects in planning, the suburban submarkets are better represented, but again, those projects could easily fall out of the pipeline, especially as demand has been concentrated in the urban core and has been much weaker in the outlying areas.

Chicago Map
Source: BuildCentral

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