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CHICAGO-It wasn’t too long ago when multifamily rental property owners were offering a month or two of concessions. However, those appear to be on the way out as the Downtown multifamily market begins a rebound, according to a report by John Jaeger of Appraisal Research Counselors.

“The rental market seems to have turned the corner,” says Jaeger, a panelist at Real Estate Investment Association’s mid-year market valuation session. “I don’t see (occupancy) going to 95% in the third quarter, but I don’t see it going back to 88% either.”

Indeed, occupancy picked up in the second quarter, led by a four-point uptick in the luxury class to 92.6%, according to Appraisal Research Counselors. That reversed a downward trend that started well before Sept. 11, Jaeger notes.

Meanwhile, concessions dropped from 9.8% to 8.5% in an area that stretches from North Avenue to Cermak Road, while effective rents for luxury multifamily units increased slightly to $1.97 per sf.

Even the weakest suburban submarket, Western DuPage County and the I-88 Corridor, shows improving occupancy, Jaeger notes. Appraisal Research Counselors reports second-quarter occupancy at 91.9%, up 1.7 percentage points from the previous three months. Lake County, which could eventually see at least one new project in the redevelopment of Waukegan’s Lakehurst shopping mall, had a 2.2-percentage-point bump to 94.3% in the second quarter while northwest Cook County posted a 2.4-point rise to 93.9%.

Sales continue to be slow, even though investors are looking for a relatively safe haven to put their money. Jaeger predicts “possibly one or two” high-rise projects hitting the market in August or September but other sellers are holding back bringing their buildings to the market.

One deal that is happening, Jaeger notes, is the 138-unit 732 S. Financial Pl. in the South Loop. Marcus & Millichap is marketing the property at $23 million, a 7.2% overall capitalization rate. Meanwhile, cap rates are even lower for sales in the Lincoln Park, Lakeview and Uptown neighborhoods further north, according to Appraisal Research Counselors.

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