Rental supply in Chicago is about to change dramatically.
This year will prove a record-breaking one for Chicago’s rental community, with more than 3,000 new apartments set to hit the market, according to a new article from The Chicago Tribune.
That will be the largest number of apartments to ever hit the market in a one-year stretch, but as the Tribune notes, the record will not stand for long – in 2016, an incredible 5,000 apartments are expected to open.
Are We Flirting with a Rental Bubble?
Because Chicago’s supply of apartments has, in the last few years, lagged behind demand, rents have risen strongly; according to the latest survey from Reis, the average rent in Chicago was $1,116 through the fourth quarter, which is up 0.4 percent from the third quarter and 3.7 percent from a year ago; similarly, the vacancy rate for the area was just 3.4 percent, down 0.3 basis percentage points from where it was in 2013.
Rent increases were even more pronounced in new Downtown buildings, according to a report from Appraisal Research Counselors. In those new structures, 2014 Q4 rents rose 8.4 percent year-over-year, averaging $2,700 a month for just a 1,000-square-foot apartment.
Such a huge influx of supply is guaranteed to keep rents in check, but could supply be rising too fast for the market? Could we be inflating a rental bubble, after finally emerging from the damage of a homeownership bubble?
It’s impossible to say until those new units hit the market, but the Tribune piece does note that in 2014’s fourth quarter, 93 percent of Downtown apartments were occupied.
What of the Downtown Condo Market?
As the rental market soars, the condo market in the Downtown neighborhoods is returning at a much slower pace; according to the Tribune article, the only 100-plus unit condominium set to open this year is 1345 Wabash from CMK, and all other buildings are mid-size/townhouse affairs.
Meanwhile, 95 percent of large apartment communities in the suburbs are leased, and the Tribune notes that 7,000-plus new units are in planning/under construction – and that’s in addition to the 3,300 that hit the market in the last two years.
So city or suburban, the rental marketplace is in full swing.