RealPage recently held a webinar where they discussed the differences between the recent performance and the future prospects of the urban core apartment markets compared to the more suburban markets.

Inspiration for this webcast came from the widespread recent speculation that the COVID-19 pandemic had disproportionately impacted properties in the urban core. The presentation was conducted by Greg Willett, Chief Economist at RealPage, and Adam Couch, Market Analyst at RealPage.

Defining terms

For purposes of this analysis, RealPage defined “urban” areas to be densely populated and highly developed areas around the central business districts of major cities. The “suburban” areas are more affordable and less densely populated areas outside the urban core. However, “suburban” areas may still be within the city limits.

Tracking occupancy

RealPage presented information on occupancy dating back to 2011. It showed that occupancy in urban properties was significantly higher than that in suburban properties at the beginning of the period. However, urban occupancy remained at about the same level, with seasonal variations, while suburban occupancy rose. Starting around 2015, suburban occupancy exceeded that in urban areas, a trend that is still in place today.

Although occupancy has fallen in both urban and suburban areas since the pandemic started, the impact has been more pronounced in the urban areas. This is shown in the first chart from the webinar, below.

occupancy urban apartment markets and suburban apartment markets

Source: RealPage

While the chart shows the overall occupancy difference between the two regions, the occupancy difference varies by apartment class. Suburban class A and B apartments achieve higher occupancies than their urban core counterparts, but urban class C apartments actually have higher occupancy than their suburban equivalents. However, the higher prices of urban apartments mean that there are fewer class C apartments available there than in the suburbs, so the overall average occupancy for the suburbs remains higher.

Urban flight

Despite reports of people fleeing the urban core, RealPage’s analysis indicates that this is not generally true. Much of the loss in occupancy being seen is the result of young people who are experiencing unemployment moving in with their parents or with roommates. Therefore, the fall that is being observed in occupancy is not so much due to households relocating as it is to the number of rental households decreasing.

While urban flight may be overstated in general, there are metro areas where it is taking place. RealPage identifies these as expensive gateway metros. The second chart, below, identifies several of them and illustrates the extent of their occupancy losses.

occupancy changes select urban apartment markets and suburban apartment markets

Source: RealPage
Tracking pricing

In addition to occupancy, pricing changes are a key metric to examine in assessing the disparate impact of the pandemic on urban versus suburban apartment markets. RealPage presented the next chart showing the long term trends in annual changes in effective asking rents for new leases for both markets.

asking rent growth urban apartment markets and suburban apartment markets

Source: RealPage

The chart shows that rent growth has been stronger in suburban areas than in urban areas since 2013. While rent growth has fallen in both areas recently, overall rent growth has remained positive in suburban areas while it has fallen to -1.7 percent in urban areas.

Despite the years of higher rent growth in suburban areas, absolute rents remain higher in the urban apartment markets. RealPage estimated the average rent for an urban apartment at $1,955 per month while the average rent for a suburban apartment was estimated at $1,349 per month.

One key to the higher rent growth of suburban area apartments is illustrated in the next chart. It shows the average annual inventory growth rates in the two regions. The much higher inventory growth rate for apartments in the urban core since 2012 has been a factor in dampening rent growth in those markets and in keeping occupancy lower than in suburban apartment markets.

inventory growth urban apartment markets and suburban apartment markets

Source: RealPage
Looking ahead

The next chart is the most surprising of the presentation. It depicts the shares of total apartment demand supplied by the urban and suburban markets. The chart shows that the suburban apartment market is much larger than is the urban apartment market. In 2011, over 80 percent of apartment demand was provided by the suburban apartment market. In recent years, that share has fallen to around 75 percent.

demand share urban apartment markets and suburban apartment markets

Source: RealPage

While the bars in this chart always add to 100 percent, the actual total number of units being absorbed quarter by quarter could be substantially different. These figures were not provided as part of the presentation.

The chart provides a projection of future demand. It predicts that the share of total demand being supplied by the urban apartment market will rise significantly during the quarter we are now completing and during the next two quarters. This is a little surprising since the attractions of the urban environment: the clubs, restaurants, bars and entertainment, continue to be impacted by COVID-19 related shutdowns.

The next chart projects how occupancy will change through the end of 2021. It is consistent with the previous chart in that it shows occupancy rising in the urban apartment markets over the next two quarters while it continues to fall in the suburban markets. By 2021, it shows apartment occupancy returning to its usual annual cycle, albeit at lower levels of occupancy than in the recent past.

future occupancy urban apartment markets and suburban apartment markets

Source: RealPage

The final chart projects how rent growth will change through the end of 2021. It predicts that the worst is yet to come for rental housing providers, with rent growth in both urban and suburban markets turning negative by the first quarter of 2021. It does not project overall rents to increase until some time in 2022.

future rent growth urban apartment markets and suburban apartment markets

Source: RealPage
Suburbs Outperform Cities as Renters Relocate: Report



Victorian Apartments

800-834 Victoria Dr. Montgomery, IL 60538

Listing Price: $14,750,000 $14,250,000

Cap Rate 6.27%
Number of Units 152
GRM 8.15
Occupancy 92.8%
Price/Unit $93750
Price/Gross SF $132.93
Gross SF 107200

Download Offering Memo

Investment Highlights

  • 152 Unit Suburban Multifamily Property
  • 32 Studios, 72 One-Bedrooms & 48 Two-Bedrooms
  • Clubhouse with Office, Laundry Facilities, Fitness Area, Outdoor Pool, and Courtyard
  • Located in Montgomery Illinois | 40 Miles Southwest of Downtown Chicago
  • Upgraded Kitchens and Baths
  • Tenant Paid Electric Baseboard Heat
  • Value-add component, upside in rents

Map Overview

Investment Overview

Marcus & Millichap is proud to present to market Victorian Apartments, a 152-unit apartment community located in west suburban Montgomery, Illinois bordering Kendall County to the South, the fastest growing county in Illinois, and the City of Aurora, IL to the East, the second-largest city in Illinois.

The subject property is approximately 40 miles southwest of downtown Chicago. Victorian Apartments consists of 16 two and three-story apartment buildings and clubhouse spread out over almost 10 acres; offering 32 large studios, 72 one-bedrooms, and 48 two-bedroom apartment homes. Community amenities include a clubhouse, an on-site management office, laundry facilities, a fitness area, an outdoor pool, a central courtyard area with a playground, and ample off-street parking. Each unit has separately metered, tenant paid, low maintenance, electric baseboard heating, and ac sleeve units. Units have updated kitchens and baths.



An online real estate database company just released new figures showing that renters’ preferred location is tiling toward the suburbs.

Zillow attributed the new data to the impact of the coronavirus because of the spike in unemployment. Zillow reasoned that renters were hit more severely by the economic effects of the coronavirus than homeowners Instead of shelling out their savings on an apartment, for instance, millions of people who previously rented have chosen to move back in with family.

Joshua Clark, an economist at Zillow, said that while the change may be viewed as a trend of shifting tastes that would be a misleading conclusion. Clark said the trend is due to the economic reality that renters face since the government issued stay-at-home orders and shutdown of many parts of the economy.

Now, real estate investors will have to decide how this recent trend will factor into their investments. To make that decision, investors will have to decide whether this trend will continue past the beginning of the year 2021 when a human vaccine for the coronavirus will likely be publicly available because offices will safely reopen and no longer ask employees to work remotely.

For the analysis, Zillow looked at 34 of the largest U.S. metro areas. In its analysis, Zillow found that rent growth slowed from the months of February to June.

During that period, rent price growth slowed more in urban ZIP codes than in suburbs. And less expensive suburban rentals are now more appealing to price-conscious consumers because they do not need to factor in a premium of commuting to work into their living location as they had to before the coronavirus pandemic.

These changes were able to happen quickly likely due to renters having more flexibility than homeowners. Renters usually have short lease terms and that impacts the fluidity of prices.

Zillow pointed out that the split between urban and suburban rent growth was present in over half of the large U.S. metros studied. It was the largest in Dallas-Fort Worth, Sacramento, San Francisco, and the greater New York metro.

But Clark has warned investors not to jump to a conclusion too quickly based on the indication of the new data.

“It may be tempting to conclude that urban renters who have been cooped up without outdoor space and unable to visit their favorite local bar are ready to commit to suburban life, and that is likely true for many,” Clark said. “But that narrative ignores the job loss that has hit renters, who are disproportionately employed in the industries most affected, and has likely played a bigger role in recent moves.”


Source: GlobeSt By Michael A. Mora | August 05, 2020, at 07:12 AM


Join the Marcus & Millichap Multifamily Forum Chicago & the Midwest in a re-imagined, all-digital, online conference format.

About this Event

>> Conference website:

Global pandemic, massive unemployment, nationwide social unrest. 2020’s free trial period has expired, and we are stuck with this lemon. How do we make lemonade out of it?

Join the Marcus & Millichap Multifamily Forum: Chicago & the Midwest in a re-imagined, all-digital, online conference format. Spanning ten days from July 21 through July 30, the conference has been organized in brief, easy-to-consume portions to minimize disruption to your work and personal life. Join live to interact directly with speakers through the Q&A feature, or view the recordings on your own time. Either way, don’t miss the group networking discussions that will allow you to connect with your peers directly to forge new connections and reestablish existing relationships.

Reasons to Attend:

  • Find out what top multifamily owners, managers, developers, and investors are thinking and doing in the Midwest markets
  • Get the latest information on equity and debt financing for multifamily properties
  • Learn how the pandemic has affected your peers’ business and what they are doing about it
  • Pool your ideas on reopening plans and social amenity usage best practices
  • Discover the current thinking regarding future distressed buying opportunities
  • Explore how multifamily value add rehab is changing in light of the public health crisis
  • Identify new technology that is now suddenly more useful and relevant
  • Connect directly through one or more of the group networking discussions or the happy hour

What You Get:

  • 6 panels organized on different days to minimize the disruption to your schedule
  • Links to recordings of each panel to allow you to view or review when you like
  • Access to online group networking discussions (sessions are limited in size)
  • Access to the online group happy hour (limited in size, first come first serve)






Downtown Chicago Rents Have Suffered While Suburban Markets Were a Mixed Bag

The  Chicago multifamily market has witnessed a tumultuous period over the past three months due to the coronavirus pandemic.

While thousands of Chicago-area residents have been furloughed or laid off as a result of the accompanying economic slowdown, many landlords throughout the region are expecting rent delinquencies to continue over the next few months and remain stuck trying to balance occupancies at the expense of pushing rents.

Rental growth is highly seasonal in Chicago. Rents typically accelerate in the first half of the year and stagnate or fall slightly in the fall and winter months when renters are less likely to be in the market for apartments and the available stock remains lower. Overall, the Chicago market bucked this trend in 2020, with rents in the Chicago metropolitan area falling by 0.8% during the period of May 15 to May 31.

However, in analyzing daily rent changes in multifamily properties from March 15 to May 31, changes in rent varied widely by submarket. For example, some suburban submarkets with tight vacancies and low asking rents actually showed positive rent growth during this time, while other submarkets with a glut of new supply and higher vacancies showed a large decrease in rent growth. Let’s take a closer look at the worst and best-performing submarkets for rental growth during this time period.

Worst Rent Performers:

Elgin-Dundee Submarket: -2.2%

The Elgin-Dundee submarket, with an inventory of 1,016 units and a vacancy rate of 13.8%, was the worst-performing submarket with rent declines at -2.2%. The submarket currently has 300 additional units underway, making up nearly 30% of total current inventory

Downtown Chicago: -2.1%

The largest submarket in Chicagoland with over 40,000 units, Downtown Chicago saw rents decline by -2.1%. Downtown Chicago has the highest asking rents in Chicago at roughly $2,600 per unit, and with vacancy hovering near double digits landlords have little pricing power in the current environment.

Best Rent Performers

Near North Suburban Cook: 7.1%

The Near North Suburban Cook submarket, with a vacancy rate of 7.2%, witnessed the largest positive growth at 7.1%, or an increase of roughly 10 cents per square foot since March 15. This large acceleration in rent growth was driven by a few large value-add rent increases in older Class B and C properties.

South and North Lake County Indiana: 1.9% and 1.7%, respectively

The South Lake County, Indiana, the submarket is one of the few located outside of Illinois that benefits from being part of the greater Chicago area while largely avoiding its numerous fiscal and tax difficulties. With a vacancy rate of 10.1% and no construction underway, the submarket’s small inventory benefits from extremely low asking rents, at $1,200 per unit, compared to neighboring submarkets. That has helped landlords continue to push rents.

Similarly, the northern portion of Lake County, Indiana, largely benefits from its out-of-state location. While asking rents here tend to be higher than its southern counterpart, at roughly $1,600 per unit, it is still discounted when compared to its closest Illinois submarket, Southern Cook County, which commands an additional $300 per unit.

Given the overall slowdown in activity in Chicago, CoStar expects rents to continue to decline throughout the year as demand formation evaporates and thousands remain unemployed.
Some positive signs remain, however, as Chicago begins phase three of its reopening plan on June 3, which will allow for some nonessential retail and restaurants to reopen with heavy restrictions imposed by social-distancing health measures.


Source: CoStar Denes Juhasz Market Analysts June 3, 2020, 10:09 P.M.