Market Conditions: Apartment Market is Sizzling as Rents Hit Another Record High
We haven’t chattered about the rental apartment market for a while.
Even though developers have been building lots of high-end luxury condo buildings, they also have been rapidly adding rental apartment buildings throughout the city.
Last year, we debated whether or not there was a bubble brewing in luxury apartments.
Recently, Crain’s updated the second quarter rental results and it was another record quarter for rents.
The downtown market is still about as good as it gets—if you’re a landlord, not a tenant. The average net rent at top-tier, or Class A, downtown buildings rose to a record $3.31 per square foot in the second quarter, up 4.1 percent from a year earlier, according to Integra, a Chicago appraisal and consulting firm. The Class A occupancy rate increased to 94.9 percent, up from 94 percent in second-quarter 2018.
That means a basic 700 square foot 1-bedroom is renting for about $2317 a month.
Class A is the best of the best, however. An example of Class A are the Wolf Point buildings.
But even Class B is hot.
The average net rents at mid-priced Class B buildings rose to $2.76 per square foot in the quarter, up 4.2 percent from a year earlier, according to Integra. The Class B occupancy rate rose to 94.8 percent, up from 93.9 percent in second-quarter 2018.
With occupancy rates rising, Crain’s asks if there might not be a supply and demand problem. There’s too much demand and not enough supply.
This could push rents up even further.
Developers will complete 9,000 downtown apartments in 2019, 2020 and 2021, down from a projection of 10,700 earlier this year, according to Integra. Development is slowing due to rising construction costs, tougher affordable housing regulations and worries about rising property taxes, said Ron DeVries, senior managing director in Integra’s Chicago office.
Is Chicago entering into a new era of high paying downtown jobs at companies like Google, McDonald’s, Grubhub, UberEats and UberFreight, Dyson, Facebook, Walgreens and Salesforce where six figure salaries are so common that thousands more luxury apartments are needed to meet demand?
Are we seeing the impacts of Amazon HQ2 on the housing market without actually winning it?
Downtown apartment boom rolls on, but developers pull back [Crain’s Chicago Business, by Alby Gallun, August 19, 2019]
No surprise that rentals are thriving. Why would anyone put their roots down in this state given the impending doom of taxation increase? The graduated rate won’t even fix the pension liability issue. Funny how amending the constitution for pensions is unfathomable yet the democratic trifecta snaps their fingers for graduated income tax and its done 😉
Per 2016 census data, Illinois lost 4.8b of income to outward migration, 2nd only to New York.
9 of the top 10 states losing income to migration were democrat with an average income tax rate of 5.75%. Democrat states net lost 22b.
6 of the top 10 states gaining income earners were republican with an average income tax rate of 2.63%. Republican states net gained 25.6b
This data is before the SALT cap and graduated income tax kicking in 🙂
https://www.bloomberg.com/news/articles/2019-05-24/migration-s-biggest-loser-is-connecticut-as-florida-profits
Losing income, losing wealth, losing population, losing tax deductions. Which 4 of these components is good for Illinois home prices?
Rent now or forever be a bagholder.
Think your deductions for owned rental units are safe? Think your already sky high tax stamp rates aren’t going up? Think you won’t see a city tax in your lifetime? 1, 2 Loris coming for you….
“Funny how amending the constitution for pensions is unfathomable yet the democratic trifecta snaps their fingers for graduated income tax and its done ?”
They also collectively turned on their vacuums and sharpened their scalpels for late term and partial birth abortions. And then threw their fists up in the air in joy, as they sacrifice to Moloch the unborn children of Illinois, our future taxpayers who might bail us out of this mess, purchase our homes in retirement, and pay income tax. The infanticide bill is literally driving people out of state.
“They also collectively turned on their vacuums and sharpened their scalpels for late term and partial birth abortions.”
Now it’s “late term and partial birth abortions” HD?
Come on. Give me a break already.
Are you one of those who wants to ban the morning after pill HD? It’s only a matter of time that pills will replace the doctor’s office. Then what will you do?
How will you control women? The nightmare!
“No surprise that rentals are thriving. Why would anyone put their roots down in this state given the impending doom of taxation increase?”
But this argument doesn’t make any sense.
Rentals are thriving in ALL states. More people are renting, than buying across the country. Even in so-called “cheap” states (which aren’t really that cheap, to be frank.) Those like Georgia and Florida. Even in, gasp, Texas.
Houston built 25,000 apartments in the last few years even before Hurricane Harvey hit.
The affordable housing laws are costing the city 1700 units a year or 5100 by the end of 2021. All this will lead to is more gentrification of outer hoods and political gifts to supporters of people like Alderman Burnett who will get to live in luxury units for $500 a month while us schlucks get a property tax and income tax hike.
” The infanticide bill is literally driving people out of state.”
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I absolutely defy you to show us a person who has seriously refused to consider moving to, or remaining in, a state because its abortion laws were too permissive.
Ye gods, man, get a grip.
“I absolutely defy you to show us a person who has seriously refused to consider moving to, or remaining in, a state because its abortion laws were too permissive. ”
I just heard on the AM radio the other day an interview with the owner of a pregnancy crisis center in Aurora – right next to an abortion clinic – who moved to Tennessee after the infanticide bill passed. She runs the clinic remotely because she can’t fathom her tax dollars supporting abortion in the state of IL. She’s obviously a bit extreme, but we all know plenty of people who’ve left the state – because of the ‘progressive’ dogmatic ideology, which goes hand and hand with the taxes. Even some die hard progressive in my office today commented – out of the blue – that she’s thinking of leaving the state next year because her real estate tax bill just crossed the five figure mark ($10,000+) She doesn’t even live in cook county.
“How will you control women? ”
Hahaha, that’s funny. That ‘controlling’ trope is so old. I have no interest in ‘controlling’ you. I’m just hoping there’s enough young people left in the state to buy my home when I retire in 30 years. Because right now, the young people – that had the luxury of being born – are leaving the states in droves. My house might be worth less, or even worthless, when it comes time to sell! Ask a retiring life long resident of Harvey or Calumet City how well their lifetime investment is working for them!
“Because right now, the young people – that had the luxury of being born – are leaving the states in droves.”
As we’ve already established, this is incorrect.
You are just gaslighting now HD. You’re better than that.
“Even some die hard progressive in my office today commented – out of the blue – that she’s thinking of leaving the state next year because her real estate tax bill just crossed the five figure mark ($10,000+) She doesn’t even live in cook county.”
Plenty of options. Plenty of great job markets. As I’ve argued, very few people have jobs where they HAVE to be in a certain city or state. If you work in marketing, you can do it anywhere.
But if everyone leaves at once, it’s not going to be so pleasant selling that house. Maybe the Millennials are the smart ones because they never bought. They can go anywhere for their careers with little thought except paying the movers.
“The affordable housing laws are costing the city 1700 units a year or 5100 by the end of 2021.”
Mike HG, what is your source on that? I totally believe it…think it might even be on the low side. This is one of my pet peeves so I like to archive the sources.
Hey Gary,
I was Quoting the real estate managing director who said projections for the Chicagoland area are down from earlier.
“Developers will complete 9,000 downtown apartments in 2019, 2020 and 2021, down from a projection of 10,700 earlier this year, according to Integra. Development is slowing due to rising construction costs, tougher affordable housing regulations and worries about rising property taxes, said Ron DeVries, senior managing director in Integra’s Chicago office.”
“but we all know plenty of people who’ve left the state – because of the ‘progressive’ dogmatic ideology, which goes hand and hand with the taxes. Even some die hard progressive in my office today commented – out of the blue – that she’s thinking of leaving the state next year because her real estate tax bill just crossed the five figure mark ($10,000+) She doesn’t even live in cook county.”
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I know people who have moved due to taxes, and absolutely no one who has moved due to political ideology. I think you won’t find anybody who — controlling for taxes — moved to a red (or blue) state solely because of taxes. Is there a “big sort” going on? Sure, but taxes are the driver even there.
“I know people who have moved due to taxes, and absolutely no one who has moved due to political ideology. ”
johnc, political ideology and high taxes are one in the same. High taxes is part and parcel with progressive ideology. Sonies, how about you? Did you leave because of political ideology? Nevada is a purple state…
“Sonies, how about you? Did you leave because of political ideology? Nevada is a purple state…”
I don’t care what women want to do with their bodies, or if gay people want to get married. I care about my bottom line, and my family’s safety. I care about the local government protecting my family, not letting violent criminals back on the street multiple times.
And giving extraordinarily large amounts of money every month to unproductive purposes like pensions, government employees and poor people isn’t good for that. Especially when the idiot machine voters there elected a couple of tax and spend socialist retards to run the city and the state.
At least my vote matters in Nevada, I would never vote in Chicago, whats the point?
“Developers will complete 9,000 downtown apartments in 2019, 2020 and 2021, down from a projection of 10,700 earlier this year”
That’s the 3 year total, not 9,000 per year.
And the MD gives 3 reasons, not just the one you initially stated.
“That’s the 3 year total, not 9,000 per year.”
Yes- over 3 years. That’s massive. Over the last ten years, has probably been close to 20,000 new apartments built just “downtown.”
“At least my vote matters in Nevada”
It does?
But as we’ve discussed, sonies real problem lies in big city versus smaller city. He was tired of big city life. It’s not for everyone. It grates on you. Heck, I just had some friends who fled San Francisco after 40 years. They were tired of the heroin addicts shooting up on the subway platforms.
In smaller cities, you get some of the big city amenities (depending on which one you’re in) without all the problems.
“High taxes is part and parcel with progressive ideology.”
Check out the recent Economist comparing Texas and California, the two biggest economies in our country. They are complete opposites on nearly everything. California is a high tax state, Texas is not. But California provides health insurance for its citizens, Texas does not (never did the Medicaid expansion.)
Interesting things like the quality of the universities are impacted. California has some of the best public universities in the country, Texas does not. There’s UT but all other other schools aren’t as good. California literally has half a dozen research powerhouses.
Price of housing is so high in California, however, that it could be a real drag moving forward. All the regulation makes it incredibly difficult to build in California. But conversely, in Texas, they build wherever they want, even in flood zones in Houston so when Harvey hit, thousands were flooded. California wouldn’t have let those homes be built. But Texas is letting them re-build in the same flood plain.
It’s a great set of articles about what the future of the country might be. Which “system” works the best. Both are successful. Both have pros and cons.
“Texas is letting them re-build in the same flood plain”
And we all get to subsidize that decision, with federal flood insurance, since no private insurer would take on that risk. “Anti-big-gub’mint” my hat.