Chicago Multifamily Market Update
Commentary from Clint Darby, Managing Director, Greystone, and Susan Tjarksen, Strategic Multifamily Capital Markets, Cushman & Wakefield
While rising interest rates and higher property tax bills created a quieter first quarter of 2022 for the Chicago multifamily market compared to the first quarter of 2021, activity in the sector is anticipated to be robust for the rest of 2022. The perennial attraction of Chicago for renters is the quality of life and the amount of real estate space for the price compared to other more expensive gateway cities. Living in Chicago provides the culture and vibrance of a gateway city for the cost of a major secondary market.
City life is returning to normal with plays, concerts, sporting events and the four-day Lollapalooza music festival back on, and job growth remains strong in Chicago. Investors are also attracted by the cap rates in Chicago compared to many other major metro areas.
Occupancy rates are high in most Chicago neighborhoods, and rents saw a 20% jump year-over-year according to Zumper data. But those rent increases that compare 2022 to 2021 and to 2020 are not as realistic as a comparison to 2019 before the multifamily market was skewed by the pandemic. In 2020 and 2021, developers focused on keeping their tenants happy and in place, which made rent increases nearly impossible, especially downtown. Now, owners are playing catch-up on rents, but it’s likely they’ll stabilize at 3% to 5% annual increases. Multifamily owners face rising costs for gas and other utilities, a property tax increase, and higher wages for employees, which are in effect reducing the conversion of rent increases into NOI.
Read the full article in Heartland Real Estate Business.