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Chicago's Multi-Housing Market to Continue to Bounce Back in 2015

Tuesday, March 03, 2015

Chicago’s multi-housing buildings and apartment market experienced a bounce-back year in 2014, despite lower-than-expected job growth. Employment and Population TotalsAs of this publication, annual employment gains reported by the Bureau of Labor Statistics have been close to half the level of 2013, raising demand for multi-housing buildings in Chicago.

Axiometrics believes that will change in 2015. “Job growth might have underwhelmed in 2014, but apartments still thrived due to the demand for rental housing,” Axiometrics analysts said. “We believe job growth will bounce back the next two years, and the market will achieve an occupancy rate not seen in more than a decade.”

Chicago Multi-Housing Development

Chicago delivered 5,000 units in 2014, and an additional 7,000 units are expected to come to market in 2015. Over the next two years, many of the new deliveries will take place in the urban core of the market, following the path of corporate relocations from the suburbs. New construction has increased in suburban areas, but the majority of the new properties are located near employment centers in The Loop and Gold Coast/River North submarkets. Urban core high-rise apartments will have to compete with the downtown condo market for high income households. With that said, properties delivered in those submarkets in 2014 absorbed units quickly.

Multi-Housing Building Occupancy and Absorption

Despite more supply on the way in 2015, Chicago’s multi-housing buildings occupancy rate is forecast to remain close to the 2014 average at 95.2 percent. In fact, Axiometrics projects the market’s occupancy rate to climb to 95.6 percent in 2016 due to improved demand fundamentals.

Chicago Completions and Net Absorption Chicago Occupancy

Rental Rates for Multi-Housing Buildings

Annual effective rent growth improved from 1.4 percent in 2013 to 3.6 percent in 2014. Axiometrics notes, “the Gold Coast/River North submarket was one area of the metro impacted by new supply beginning in 2013, but it rebounded in the second half of 2014. Expect rent growth in the metro should maintain, and even improve, as job growth strengthens in 2015 and 2016.” Axiometrics forecasts Chicago’s rent growth to average 4 percent per year from 2015 to 2017.

Chicago Rental Rates Chicago Annual Rental Rates Graph

Contact HFF Chicago for more information regarding multi-housing properties on the market in this area.

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