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CHICAGO-While Downtown condominium conversions are returning to normal levels, 2006 could be a record year for new multifamily construction, according to Appraisal Research Counselors. The multifamily sages report marketing efforts have begun on 14 projects, involving 3,382 units, through the first four months of the year.

Sales also are running at a record pace, with 1,624 units going under contract or reserved during the first quarter. It is the largest number Appraisal Research Counselors has seen since it began tracking sales in 1997. “Consistently, the bulk of the sales velocity tends to fall within the $300 to $399 per sf range, along with an increasing trend toward higher prices in very well located, more luxurious buildings,” vice presidents Ron De Vries and Gail L. Lissner say in their most recent “Residential Benchmark” report. “Newly announced developments with product below $300 per sf was non-existent in the market.”

After a year that saw 4,000 rental units become condominiums in 2005, De Vries and Lissner predict conversions will return to more normal levels, which typically has meant about 1,150 units per year. So far this year, they note, no rental buildings have undergone conversion. Also, the 396 units sold in the first quarter is the slowest pace since the end of 2004. “Sales also appear to be value-driven, with buildings offering product priced below some of its competition outselling the others,” they add.

Operators of Downtown multifamily rental buildings have seen occupancy rise nearly four percentage points from the same period last year, to 95.7%. Concessions have dropped by more than half, Appraisal Research Counselors reports, while rents for class A units have cracked the $2 per sf barrier again.

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