A flurry of apartment construction has Chicago’s downtown multifamily market nearing capacity, which is expected to cause rents there to drop by the second half of the year, according to the Chicago Tribune, citing data from Appraisal Research Counselors.
Inventory levels are expected to be up 150% from mid-2005 by 2018, with 8,005 rental units in 23 buildings currently under construction and 10 more buildings in leasing with supply considerably outpacing demand.
- Employment growth has helped the city account for the additional apartment inventory so far, but tight financing is holding back attempts to convert some to for-sale condominiums due to oversupply in the rental market.
A strong job market is driving demand for apartments in downtown Chicago. Developer Sterling Bay recently snagged a $209 million construction loan for McDonald’s new corporate headquarters, which is relocating to the city. Canadian design and engineering firm Exp also announced plans to move its headquarters, bringing 150 jobs from Toronto to join a team of 230 workers already in Chicago. And equipment giant Caterpillar is relocating its global headquarters from Peoria, IL, to a yet-to-be determined location in the Chicago area.
Developers are responding in tune, with a host of new residential construction activity, particularly in the upper end of the market.
Ground broke last month on the 479-unit luxury apartment tower, Essex on the Park, in the city’s booming South Loop. Also underway in the South Loop is the $1.5 billion Lendlease-led Chicago Riverline joint venture, which will add 3,600 residential units.
The increase in supply overall has allowed the slowly recovering housing markets in the Midwest to be a competitive alternative for cost-sensitive buyers in an environment of elevated home prices. A recent Zillow report found that homes in the Windy City spend more than 100 days on the market, on average, compared to roughly 50 days in the country’s tightest markets, located on the West Coast.
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