Suburban apartment buildings are filling up as more real estate consumers opt to rent rather than buy, according to a Crain’s article by Alby Gallun.
The occupancy rate at suburban multifamily properties went up to 94.3 percent in the third quarter, its highest level in four years, according to a recent report from Chicago-based consulting firm Appraisal Research Counselors cited by Gallun. The rate was at 93.9 percent in the second quarter and 92.9 percent in the third quarter of 2010.
Falling prices and a lack of mortgage financing in the housing market have spurred an increased demand for rentals, and Gallun reported that Appraisal Research vice president Ron DeVries expects more of the same in 2012.
“I don’t see anything that indicates a softening in the market,” DeVries said. “It should be at least as good as it has been over the past year.”
While the suburban occupancy rate is soaring, the median net rent is also at an all-time high – $1.18 a square foot in the third and second quarters, up 2.9 percent from a year earlier and up 11 percent since bottoming out in 2009, according to the Appraisal Research report cited by Gallun.
The third quarter’s occupancy and rent escalation has incited numerous rental property investments, and developers are getting in on the action, too. Gallun reported 20 suburban apartment developments are in the works, totaling more than 3,900 units. But just one, a project in Evanston, is currently under construction.
The market would suffer if all the projects launch, but developers have a few hoops to jump through before starting construction, like obtaining approval from local governments and getting a construction loan.
DeVries said, “They’ve got a lot of hurdles to overcome before they get a shovel in the ground.”