There are some obvious side effects of the coronavirus pandemic that are starting to hit the Chicago apartment market, such as a rapid increase in virtual showings.
“Once talks of a citywide stay-at-home order began, we knew we had to prepare our business to continue leasing virtually,” Aaron Galvin, CEO of Luxury Living Chicago Realty, said in a press release accompanying the results of a study the company conducted to better understand how local leasing has been impacted by the COVID-19 crisis. “That meant gathering all of the right assets, extensive training for our team and updated messaging for customers to know we were ready for them virtually.”
In examining data from its portfolio of Class A multifamily units across 10 downtown Chicago neighborhoods, Luxury Living Chicago Realty compared year-over-year leasing data from the same 11-week period from mid-March to the end of May of 2019 and 2020. Overall, the company saw a 12% reduction in showings year over year, and 93% of the showings during the time period in 2020 were conducted virtually.
Galvin noted this resulted in a longer amount of time between when a renter first tours an apartment to when they complete the rental application. In 2019, the average time from showing to the application was 3.9 days, compared to 8.8 days in 2020.
“The hesitancy in submitting an application was expected given the current environment,” said Galvin, adding that uncertainties about job security and move-in rules may have contributed to the slower pace as well. “Since renters were working from home, they had much more time to explore more properties virtually. We have always seen renters considering multiple neighborhoods, but the sheer number of virtual tours most renters had before deciding on an apartment increased substantially.”
Perhaps the most counterintuitive finding was that renters were not necessarily looking for more space. While being cooped up at home has caused many to predict a coming rejection of density and small living spaces, Luxury Living Chicago Realty noted that recent stay-at-home orders may be causing couples to rethink their plans to move in together. When the company compared its shares of couples versus single renters year over year, it found couples accounted for 65% of all leases during this period in 2019, but only 49% in 2020, a 16% decrease.
As a result, smaller apartments were actually in demand. This echoes recent predictions from real estate advisory firm RCLCO, which found small apartments may be increasingly preferable to the 31% of multifamily renter households with roommates.
This reduction in space, combined with reduced demand and moving activity overall, might account for lower rents. “The overall reduction in rents is not only about lowered rents and increased concessions, but also about the types of units that are being rented,” said Mark Ziemke, director of leasing strategy at Luxury Living Chicago Realty. “Our portfolio saw a dramatic decrease in premium two-bedroom rentals this year over last and far [fewer] couples and roommates securing new rentals. Even with people working from home, most are opting for smaller unit size apartments.”