Apartment Market Rebounds in Chicagoland

(To read more on the multifamily market, click here.)

CHICAGO-The apartment market is returning in the metro area, according to market experts. Owners, lenders and analysts such as Marcus & Millichap and Appraisal Research Counselors say there are a number of reasons why the residential rental market is on an upswing, and should continue through 2007, such as an improved job market, higher interest rates, a shrinking of available units due to condo conversions and limited new construction.

“The apartment sector is fantastic,” says Tannie Schnell, managing director of locally based Meridian Capital Group LLC, which specializes in multifamily lending. He tells GlobeSt.com that owners are crowing about waiting lists and the ability to raise rents, following a few tough years of major incentives to entice business. “The concession word in this city doesn’t exist anymore,” Schnell says. “In a three- to five-year time frame, condos have converted thousands of units, taking massive amounts of inventory out of vacancy.”

According to a recent Chicago Apartment Research Report, apartment vacancy is expected to decline 80 basis points in 2006 to end the year at 5.7%. Asking rents are expected to rise 3.8% to $1,006 per month by the first of the year, while effective rents will advance 4.1% to $936 per month, according to the report. Median sales prices in the past 12 months reached $87,500 per unit, a 4.7% increase from the median 2005 price per unit.

Also, while home ownership interest rates rise, employment figures show strength in the ability to attract new workers to Chicagoland, according to the report. Chicago is expected to add more than 74,000 new jobs. Schnell says that the only thing that makes apartment owners nervous today is the possibility that the condo market, which has faltered in the city, may try to de-convert the properties, “dumping them back into the apartment market,” he says.