Suburban apartment market still strong, but slowing down
The median net rent in the Chicago suburbs rose 1.2 percent in the second quarter from a year earlier, down from 2.8 percent and 5.2 percent gains in the two prior 12-month periods.
Suburban apartment landlords keep hiking rents, but they’ve lost some of their pricing power.
The median net rent in the Chicago suburbs rose to a record $1.47 per square foot in the second quarter, up 1.2 percent from a year earlier. The suburban occupancy rate rose to 95.6 percent, up from 95.5 percent in second-quarter 2017.
Apartment rents across the nation have soared over the past several years amid the expanding job market, the primary driver of demand for apartments, and a continued preference for renting over owning among some people. Millennials, for instance, are getting married later than 25- to 35-year-olds have in the past, pushing off home purchases and renting instead. And more empty nesters are selling their homes and moving into apartments, boosting demand for rental housing in some markets.
Indeed, the rising rents of the past few years have fueled a suburban construction boom, with developers adding 1,363 units in the suburbs so far this year and another 4,148 under construction, according to Integra. Developers completed 2,831 suburban apartments in 2016, an annual record, and 1,843 last year.
The construction is spread out over a large metro area, reducing the risk of a glut, but some suburbs where developers have been especially busy have felt the impact. On the North Shore, which has added 1,917 apartments since the beginning of 2015, the median net rent fell 6.2 percent in the second quarter from a year earlier, more than any other suburban submarket, according to Integra.
“That’s going to be a challenge,” DeVries said. “That’s quite a bit of inventory for one community.”
Competition will be good for tenants, who have been on the wrong side of the rising apartment market for a long time. The median net rent for a hypothetical 1,000-square-foot suburban apartment has risen to $1,470 a month, up 28 percent from $1,150 seven years ago, according to Integra.
Source: Crains Chicago Business September 10, 2018 12:21 PM ALBY GALLUN
Randolph is a Multifamily Investment Sales Broker with eXp Commercial servicing Multifamily Buyers and Sellers in the Greater Chicago Area.