Last year, the story line being told about all the major cities, was that “the city” was doomed due to COVID fears, the BLM protests and riots and the ability of the professional workers to work-from-home, including working from anywhere in the country.
In Chicago, downtown condo sales, and prices, plunged and the rental towers saw their worst occupancy in decades.
But by this summer, with the economy reopening and entertainment events returning such as concerts and some street festivals, Chicago real estate started to recover.
Empty downtown apartments have filled up quickly in 2021.
From Crain’s:
“Hui is among the herd of renters who have stampeded into downtown Chicago this year, fueling a staggeringly swift turnaround of a market that was struggling amid an exodus of tenants just a year ago. The 31-year-old brand manager recently left Minneapolis to take a job with Tyson Foods in the West Loop, signing a lease for a one-bedroom unit at Presidential Towers, a huge apartment complex nearby.
“I’m really excited about it because it’s a nine-minute walk from work,” Hui says.
It’s one story among many explaining why downtown high-rises are full again and rents hit record highs in the second quarter, according to the Chicago office of Integra Realty Resources, an appraisal and consulting firm. The number of downtown apartments leased in the first half of 2021 already far exceeds the leasing volume for a good year.”
According to Crain’s, last year’s big incentives, with some luxury buildings given out 3 or 4 months “free” rent, seemed to work to lure in tenants.
“Brooke Miller moved from South Florida to Chicago in March after signing a lease at Spoke, an apartment building in River West, that included two months rent-free along with two months of free parking. A flight attendant, Miller didn’t have to move here for her job, but she grew up in Indiana and wanted to live in a big city that was close to her family.
“I came into the market at a great time,” she says.”
Where are all these tenants coming from?
Luxury Living, which handles 3,000 apartment rentals, including those on Wolf Point, is seeing strong relocation tenants.
So far this year, relocations have accounted for about half of Luxury Living’s leases—up from 40% in prior years—with people from outside Illinois representing 35% and suburban relocations representing 15%, he says. Last year, renters moving into the city from the Chicago suburbs accounted for about 25% of the total.
Occupancy fell to 86.5% in the fourth quarter of last year, the lowest since data began in 1998.
According to Integra, by the second quarter of 2021 it had already rebounded to 94.5%.
Over 3,300 apartments were absorbed in the quarter.
Integra is expecting 6500 apartments to be absorbed this year.
According to Crain’s data, that’s the highest level of absorption going back to 2003.
No other year has ever seen over 4,000 units absorbed.
Rents on Class A apartments also rose to a new record in the second quarter, of $3.41 per square foot. The prior record was set in 2019, pre-pandemic, at $3.31.
OneChicago, the massive 2 building development across from Holy Name Cathedral downtown, is nearing completion this fall.
The two buildings will have 735 apartments and 77 luxury condos along with a large Whole Foods and Lifetime Athletic Resort and Spa.
“Based on current leasing volumes, Letchinger expects that more than 100 apartments will be leased by Oct. 1, when the first residents start moving in. One Chicago rents so far average about $4.20 per square foot, among the highest in the city, he says.
“I am pleasantly surprised,” says Letchinger, founder and CEO of JDL Development.”
Is this the best it will ever be for downtown Chicago landlords?
And what does it mean for the downtown condo market, which has seen prices slide?
Will it soon be cheaper to buy a condo than rent an apartment, swinging momentum towards buying?
Why is the downtown apartment market so strong now? [Crain’s Chicago Business, by Alby Gallun, August 27, 2021]
