Meanwhile, the market's vacancy rate of 7.4% is expected to fall to 7% by the end of 2004, according to Marcus & Millichap.

"Transaction velocity will likely outpace 2003's level, but values may be reaching a plateau," Marcus & Millichap's research report predicts. "Investors' appetite for Chicagoland apartments have pushed prices up nearly 23% over the period from 2000 to 2003, while the combination of declining occupancies and heightened concessions has resulted in an average revenue loss of nearly 7% over the same period."

One of the last in deals in 2003 defies the predicted plateau. A 31-unit building at 6350 N. Hoyne Ave. in Chicago's West Rogers Park neighborhood. At $2.6 million, it sold between private investors for nearly $84,000 per unit, and property records indicate it was financed for nearly $3.9 million. However, all of the units are two bedrooms and two baths, says Jeff Mucha of Sperry Van Ness in Chicago.

"This property is an excellent investment opportunity due to its multiple uses, income possibilities, and prime location," says Mucha, who represented the seller in negotiations with Tara Mathew, also of Sperry Van Ness. "Demand and desirability for properties in this area are increasing in conjunction with the dramatic rise in development in the downtown Chicago area."

One area bucking the trend are suburbs in southeast Cook County, where the average effective rent was up 3% over the last two years, while declines ranged up to 5% elsewhere. This year, rents across the market are expected to rise just 0.5%, to $950 per month.

"With the bottom reached, investors will do well by identifying assets in historically strong, but recently challenged, locations such as Downers Grove and Kane County in the west and the northwest suburban submarkets of Palatine, Schaumburg and Hoffman Estates, as recovery in those areas will be more rapid."