CHICAGO-It’s clear that apartments are the most preferred assetin the Chicago area, with vacancy for the city and suburbs hoveringaround 6.5%, according to a third quarter Marcus & Millichapmarket report. However, even low vacancy is having trouble pushingrents off their stable position, new development is non-existentand there’s still not good enough lending for large purchases.

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Deals still exist, says Stephen Rachman, a VP of investments forthe company. “Multifamily debt has never been more attractive. Iwould argue we’re in a seller’s market,” he says. “Demand is led bywell-located assets, which sets off a bidding frenzy.”

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The demand is fueled by the job market, which should see about40,000 positive new jobs this year, according to the report. Thiscompares to the loss of 234,400 jobs in the Chicago area in 2009.However, the job growth is going slow, with only almost 7,000 newjobs added in the first half.

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There are ideas for new development, but not many have brokenground. There are 580 new units under construction in the Loopmarket, which also has the highest vacancy at almost 12%. Proposedconstruction in the suburbs totals 5,460 units in 21 projects, butnone have broken ground. The second quarter delivery of the 84-unitCommons at Town Center in Vernon Hills will be the only completionthis year in the suburbs, according to the Marcus & Millichapreport. With little competition, rents will increase slightly bythe end of the year.

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“It’s nearly impossible to get a construction loan today,there’s just fewer people who can qualify for loans,” Rachman says.“Though it wouldn’t surprise me if we saw a new development in awell-located infill location.”

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Multifamily loan originations have increased 37%, but haveremained below last year’s levels, according to SVP William Hughesin the report. He said life insurance companies have ramped uplending and CMBS have shown renewed signs of life, but the agenciesremained the dominant sources of multifamily lending.

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