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CHICAGO-Sales volume for larger multifamily rental buildings is on pace to set a record this year, according to Appraisal Research Counselors. The appraisal firm reports $379 million in sales through the third quarter, which would be second only to 2000 if no other deals closed.

However, the firm’s most recent “Downtown Chicago Residential Benchmark Report” notes two buildings, 440 N. Wabash Ave. and 222 N. Columbus Dr., are under contract for an estimated $242 million combined, while six more buildings are on the market. At the same time, capitalization rates are rivaling 2000, at 6.69%, according to Appraisal Research Counselors, with the properties on the market being offered at an average cap rate of 5.30%.

“There continues to be plenty of cash chasing apartments,” according to the report co-authored by vice presidents John R. Jaeger and Gail L. Lissner. They add those holding the cash continue to be familiar players.

“Brokers report that private investors still dominate the market, with pre-emptive bids on buildings before they officially hit the market,” according to the report. “The market continues to be a battleground between private investors and condominium converters.”

While the private investors have dominated the Downtown and North Side markets, Appraisal Research Counselors report pension funds have been aggressive in the suburbs. “We expect the condominium converter to play a dominant role in the next three to six transactions occurring in the Downtown market,” according to the report.

With the Downtown and North Side submarkets becoming overheated, the Hyde Park and South Shore communities along the lakefront have become more popular, brokers tell Appraisal Research Counselors.

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