Increasing buyer confidence continues to drive strong new construction sales downtown, contributing to a positive outlook on Chicago’s new condo market. However, questions remain amid this steady uptick. What impact will limited new condo inventory have on buyers in the months ahead, and when can consumers expect to see supply increase?
Today’s inventory consists of very few large-scale new construction condo developments and just a handful of smaller projects. As a result, sales velocity continues to be brisk. Case in point, we have sold 370 out of the 504 residences in our South Loop Luxury Collection in just 18 months, with absolutely no sign of a slowdown.
The new construction market will not be in a complete standstill, with plans for boutique condo projects coming to fruition. For instance, Related Realty was recently enlisted by Akara Partners to spearhead the marketing and sales effort for a 28-unit luxury building at 100 W. Huron, delivery slated for fall 2015. We’re seeing an influx of three- and six-flat projects pop up in areas like West Town, Wicker Park and Bucktown. With that being said, Chicago is still two to three years out from any large-scale new construction projects delivering.
Here are three points to keep in mind:
1. Pent-up demand, paired with dwindling inventory, has had a significant impact on pricing. South Loop Luxury is the perfect example. Prices have already increased by 25 percent since the start of our sales program in 2013. In this environment, brokers should constantly educate clients about the state of the market, so that they are ready to make an offer when they find a property that fits their parameters.
2. Buyers are now, more than ever, drawn to projects affiliated with a notable architect and team. We are also noticing that more buyers are planning ahead and gravitating towards property that they can live in long term. As a result, we are noticing demand for larger homes, particularly three-bedroom units – a trend that we pay close attention to and will reference when preparing the unit mix for future projects.
3. Positive market indicators, such as strong demand and price appreciation in sought-after neighborhoods, contribute to restored confidence in the residential market. All in all, they are great indicators that the market will continue to improve over the next few years, presenting great opportunities for buyers, sellers, brokers and developers alike.
David Wolf is president of Related Realty, a full-service brokerage firm that is an affiliate of Related Companies. Under Wolf’s leadership, Related Realty manages sales for Related Midwest’s South Loop Luxury collection.