As we’ve been chattering about for several months now, the sheer number of new apartment high rises combined with investors trying to rent out unsold condo units has created a glut of rental units downtown.
From the Chicago Tribune:
Rates in the “best of the best” apartments in the downtown area on average dipped from $1,850 a month for a one-bedroom unit in 2007 to $1,750 a month in 2008, says Ron DeVries, vice president of Appraisal Research Counselors, a real estate appraisal and consulting firm.
The reason, says DeVries, is that 1,974 new rental units opened in the area bounded by North Avenue, McCormick Place, Lake Michigan and Ashland Avenue in 2008. Another 954 are expected to be delivered in 2009.
“It is the biggest new supply [of rental units] we’ve seen since the early 1990s,” he says.
Those figures do not include the “ghost” market of rented condominiums. An estimated 20 to 25 percent of downtown condominiums are rented privately, so as thousands of new condos come on stream in 2009, the number of available rentals is expected to rise significantly.
“We’ve got more condos being delivered downtown which are becoming rentals and there’s more traditional apartments being delivered downtown … so we’ve got an increase of supply of traditional rentals, we’ve got condo rentals and a weaker job market. It’s really converged for a downturn in net rents,” DeVries told a fall gathering of the CAA, which represents more than 600 properties and more than 136,000 apartments in the six-county Chicago region.
Some landlords are offering juicy concessions including 3-months of free rent and no security deposits.
The outlook doesn’t look as positive in the other glamour neighborhoods like Lincoln Park, Lakeview and Bucktown where rents are expected to move higher in 2009 due to fewer new apartment buildings being built.
“In our world—which is urban, vintage and along the lake all through Chicago, I think they will be some modest increases,” Stuart Handler, chief executive of TLC Management, Chicago, told the CAA at its “Preview 2009.”
While there may be deals on some of the rentals of condo units downtown- there is also the looming problem of foreclosures.
DeVries says it might be wise to consider your personal “risk-and-reward” quotient before signing on the dotted line.
“I think they can get a deal,” DeVries says.
Renters, however, need to be honest with themselves about personal tolerance and willingness to forgo the 24-hour service that a well-managed apartment building offers in exchange for dealing with the chance that an individual landlord, especially one who is new and inexperienced, may not be as responsive when a problem arises.
Those looking for a long-term residence should remember when renting from a private owner there is always a chance that the owner will decide to live in the unit, so you may not have a renewal option.
Finally, given the shaky economy, consider the “risk that you come home one day to see a foreclosed notice posted on the door,” DeVries notes.
Renters likely to have their pick of downtown units in ’09 [Chicago Tribune, Dec 28, 2008]
