CHICAGO—The Chicago metro area saw above average annual rent growth as of the second quarter of 2013, just missing the top ten performers among the 100 largest metro areas in the US, according to a study recently published by MPF Research, the market intelligence division of RealPage, Inc., a Texas-based software provider. Chicago tied with Raleigh-Durham for 11th place, with both areas seeing 3.5% increases in effective rents for new leases compared to the second quarter of last year.
“What really pushed up the overall rent growth from where it had been earlier was some newfound momentum in the suburbs,” Greg Willett, vice president of MPF, tells GlobeSt.com. “Most suburban areas saw annual rent growth move from about 1% earlier to about 3% now.” Still, the strongest annual rent growth happened in urban neighborhoods like Lincoln Park/Lakeview, which saw growth of 7.6%, and the Loop, which had growth of 5.7%.
Nationally, “a comeback in for-sale housing has not derailed the very strong performances posted over the past few years in the nation’s apartment sector,” the MPF data show. “Some of the pent-up apartment demand from young adults who have been living at home with mom and dad or in other combined-household situations is being unleashed,” Willett adds.
Occupancy rates have remained high as demand has outstripped deliveries of new units, both in the Chicago metro area and the nation. The national occupancy rate was 95.3% in the second quarter, a slight uptick from the second quarter of 2012. And in the Chicago area, the rate has hovered between 95% and 96% since 2011, and now stands at 95.7%. “That’s up 80 basis points on a quarterly basis, thanks to the big demand for 3,820 units seen specifically in [the second quarter],” Willett says. “But as with the national occupancy figure, the big picture story is simply that it’s been at the essentially full level for quite a while, and it’s continuing to hold there.”
“There are 8,357 units under construction in Chicago right now,” he adds. “That’s the largest volume seen since we started tracking the market in the early 1990s. However, the additions only translate to 1.2% inventory growth, which is pretty mild by national standards.” Therefore, the occupancy rate should stay above 95% and rent growth should continue at roughly the same pace. And, “as we’re starting to see now, the suburbs probably won’t be the laggards they were earlier. Thus, we expect most individual neighborhoods to register rent growth around the overall metro average.”