Continued Suburban Chicago Multifamily Strength.
Suburban apartment rents climbed to yet another high in the first quarter, continuing an upward trend that began nearly 3½ years ago.
The median net suburban rent rose to $1.21 a square foot in the first three months of the year, up from $1.19 in the fourth quarter and $1.17 a year earlier, an annual increase of 2.9 percent, according to a report from Appraisal Research Counselors, a Chicago-based consulting firm.
The suburban occupancy rate also increased, reaching 95.1 percent, vs. 94.9 percent the previous quarter and 94.7 percent a year earlier.
Demand for apartments remains strong as many suburbanites continue to favor renting over owning. While the pendulum is shifting back in favor of owning amid a recovering market for single-family homes and condominiums, it’s still hard for many people to get a mortgage, leaving them with no alternative to renting.
“We used to have people running out the back door to buy homes or condos but the door’s been closed a bit for a while,” said Appraisal Research Vice-President Ron DeVries. The door has opened slightly “as the housing market is recovering, but we’re still seeing good capture of people just remaining in the rental market.”
The job market also may be starting to work in landlords’ favor. When hiring is weak, renters tend to double up or even move in with family to save money, depressing demand for apartments. But revised numbers from the U.S. Bureau of Labor Statistics show that the Chicago area added 64,100 jobs in 2012, up from 57,800 in 2011 and the first time annual job growth has topped 60,000 since 1998, according to the report.
Mr. DeVries expects rents to increase 3 percent to 5 percent this year but said that growth could slow in certain submarkets in 2014.
As rents and occupancies have continued to rise, so, too, has the number of developers looking to capitalize on the trend. Six suburban projects comprising 1,425 apartments are under construction, with two dozen in the planning phase, including about 2,000 units on the North Shore alone.
Among them: a 368-unit apartment complex in Evanston being developed by Chicago-based Carroll Properties and Fifield Cos.
Carroll President Robert King said the development venture recently secured a $75 million construction loan and plans to break ground by mid-summer. He declined to disclose the lender.
“We think our demand is going to be from the university and downtown Chicago,” he said, adding that the development will offer young professionals an urban product at a suburban price.
Less than a half-mile away, a joint venture of Northfield-based Focus Development Inc. and Atlanta-based Atlantic Realty Partners is courting tenants for a 175-unit apartment project at 1717 Ridge Ave., while Chicago-based Amli Residential is leasing a larger 214-unit development in south Evanston.
Despite the competition, Mr. King said he isn’t concerned about overbuilding in the Evanston submarket.
“Ours is the last really significant buildable site in downtown Evanston,” he said. He expects to deliver the first units in the second half of 2014.
While a number of projects in the pipeline will be delayed or, in some cases, never built, Mr. DeVries said the disproportionate number of units slated for the North Shore could pose challenges for developers down the road.
“We haven’t seen this kind of volume in a long time,” he said. “I don’t think we’re at the point of a problem yet, but if every one of these deals that are on the board gets financed, then you’re going to start to see, I think, a little bit of pain.”
Source: Chicagorealestatedaily, Abraham Tekippe June 03, 2013