CHICAGO- Marcus & Millichap recently released its National Apartment Index and calls Chicago one of the Midwest’s top markets. The firm expects both a burst of apartment completions and a falling vacancy rate as residents flock to the new construction. Approximately 3,500 units will get delivered during the year, a huge increase over 2012 when only 600 were finished.
“City vacancy will rise periodically during 2013 as new properties come online, but the rate will end the year below 4 percent,” the firm’s annual report says. “During 2012, a 70 basis point decline was recorded” and “in 2013, vacancy will slip 20 basis points to 3.6 percent.”
The firm examines 44 of the nation’s top markets and ranks Chicago 20th, three places lower than last year but above all other Midwestern cities except Minneapolis. They rank cities according to a series of weighted indicators like expected employment gains, vacancy rates, construction activity and rents, among others. Marcus & Millichap caution, however, that the index can’t “predict the performance of individual investments. A carefully chose property in a bottom-ranked market could easily outperform a poor choice in a top-ranked market.”
Considering the strong projections on construction and vacancy, Chicago would probably rank much higher if it were not for a relatively disappointing jobs outlook. Although the city added 31,000 jobs in 2012, and will add 44,000 this year, an expansion of 1.0 percent, “its job growth forecasts falls short of every other NAI market.”
Still, “asking rents will rise 4.0 percent to $1,141 per month in 2013. Effective rents will also advance 4.0 percent to 1,072 per month.”