Has Chicago rent relief already begun?

Chicago Tribune - Gail MarksJarvis - 11 Oct 16

Rents in the Chicago Loop have begun to fall, suggesting relief may be at hand as a record number of new apartments continue to come on the market.

In the third quarter of this year, the average rent in the Loop declined 1.2 percent to $2,176, according to apartment tracker MPF Research. And for the year, Loop rents fell 1.8 percent. That decline was in contrast to the full Chicago metropolitan area, where rents rose 2.2 percent to an average of $1,372 over the last 12 months, said MPF.

Nationally, rents in 100 of the largest metropolitan areas have climbed 4.1 percent during the last 12 months. But in cities with some of the most hefty increases, prices fell during the third quarter for the first time since 2010, perhaps an early sign that rents finally are meeting resistance after an unprecedented spike in prices and new luxury apartment construction.

MPF reports that in the third quarter, San Francisco experienced a 3 percent decline. New York also saw rents fall 1 percent.

In some of the priciest areas of Chicago, where new luxury buildings are under construction, rents are continuing to rise. During the third quarter, the average rent for Streeterville and River North was $2,281 — a 1.9 percent increase, according to MPF.

Meanwhile, a building spree of luxury apartment high-rises continues. This year and in 2017 a record number of new apartment units will enter the Chicago downtown market, according to Ron DeVries of Appraisal Research Counselors.

"We're in the stage where you might see some softening," said DeVries. This year there will be 4,000 new apartments downtown, and next year a record 5,000, he said. Already apartment managers are offering concessions, sometimes waiving move-in fees or offering a month or two of free rent, he said.

Rents in the Chicago Loop have begun to fall, suggesting relief may be at hand as a record number of new apartments continue to come on the market. (José M. Osorio / Chicago Tribune)

Occupancy is 96.6 percent, a solid rate, according to MPF. Since the Great Recession, the market has been able to absorb a record number of new units because more people are renting and fewer owning homes than at any time in decades.

Over the past two years, overall rents climbed 12.4 percent in the Chicago suburbs and 9 percent downtown, according to DeVries. But the downtown number is skewed by new buildings, which charge the highest rents. If the new buildings are removed from the calculation, downtown rents have climbed only 1.7 percent in two years, he said.

In Streeterville or River North, the average price of an apartment built before 1980 is $1,616, according to MPF.

Newly constructed buildings downtown are charging about $3.25 to $3.50 a square foot, or about $3,500 for 1,000 square feet, DeVries said. Slightly older buildings charge $3.03. In the suburbs, a relatively new apartment would average $1.64 a square foot.