Recently, Crain’s Chicago Business ran an article with the tagline “Uh Oh. Downtown Apartment Rents Drop.” That might be bad news for developers who aren’t able to maintain the high pricing and low vacancies of Summer 2013, but it’s a great opportunity for the Chicago renter and us as agents.
As a rental-focused broker, I work with renters and speak with landlords and developers daily, and the writing has been on the wall for some time that the high downtown rental prices had to come down. The first sign of a decline in pricing came about 90 days ago, when properties started offering concessions of one, and even two months free rent – an incentive not seen since 2010.
The Crain’s article featured David Carlins, the president of Chicago-based Magellan Development Group LLC and partial owner of Aqua at Lakeshore East. Aqua has really been feeling the pinch, going from 98 percent occupancy a year ago to around 86 percent now. That equates to 57 vacant apartments – a huge number for a building that used to only have one or two apartments available on a good day. Now those same apartments are renting for between $500-$700 less per month than at the height of the market.
A big trend we see for 2014 is the return of the downtown renter. Many of these returning renters used to live in places like Aqua when they were first built in 2009 and 2010. When the market jumped up and rent increases exceeded 10 to 20 percent annually, those renters moved to the neighborhoods, giving up the convenience and luxury of the downtown high-rise to save some money.
Now those renters are coming back downtown. They are able to get a better price on newer rental inventory.
The demand is still very much there for downtown apartment rentals. Especially as companies continue to open and relocate to downtown Chicago, past renters return to downtown and new renters discover the luxury of living in the state-of-the-art high-rise.
When just a few months ago, popular downtown neighborhoods such as River North and Streeterville may have been out of your client’s price range, there are now great values to be had in buildings built just a few years ago.
As new condo inventory develops, 2014 is a great time to work with clients who want to live downtown, and offers them a rental option while they wait for condo development to catch up.
Aaron Galvin is the managing broker and owner of Luxury Living Chicago Realty, a rental focused brokerage. He is a top 1 percent producing residential rental broker, as recognized by the Chicago Association of Realtors. For more insight on the downtown Chicago luxury apartment market, you can read his blog, “The Luxury Chicago Apartment Update,” at luxurychicagoapartments.com/blog.