Q2 2012 Chicago, Illinois Apartment Submarket Trends

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Q2 2012 Chicago, Illinois Apartment Submarket Trends

The strongest apartment markets are located in prime areas of the City of Chicago, as young adults and other transients have developed a preference for urban living. Reis designates several downtown Chicago submarkets including the Gold Coast (a.k.a. River North), The Loop and South Shore. Other city submarkets, including City West, also are tracked by the firm. Chicago’s vast suburbs are divided by Reis into 18 submarkets, most with more than 10,000 units of inventory; some with higher rents and some with rents as low as in poorer areas of the City of Chicago. A sampling of the submarkets is discussed below.

Downtown/The Loop

  • Although primarily a business district, The Loop has 14,023 apartment units according to Reis. In the second quarter of 2012 the vacancy rate was 4.5% and the average asking rent was $1,762 per month, the second highest among 25 submarkets.
  • The vacancy rate decreased 20 basis points during the quarter, and is down 250 from a year earlier. The average asking rent increased 1.2% during the quarter, with the average effective rent up 1.4% to $1,567 per month. The year-over-year gains are plus 0.6% asking and plus 1.1% effective, as a result of a weak first quarter.
  • Two apartment projects are expected to complete construction in the near term, with the 310-unit 188 W. Randolph Tower forecast to open in December and the 499-unit Coast at Lakeshore East predicted to complete construction in February. The 500-unit Waterview Tower is expected to break ground in November.
  • The greater Loop area contains a large number of old office buildings with conversion potential and former industrial sites on its fringes available for development. Development opportunities are plentiful, and Reis predicts nearly 2,800 apartments will be added here from 2012 to 2016.

Gold Coast

  • The 26,484-unit Gold Coast submarket, just north of the Loop, has the highest average asking rent among the submarkets at $1,800 per month and a vacancy rate of 3.8%.
  • The vacancy rate fell 40 basis points during the second quarter and is down 90 from a year earlier. The asking rent rose 1.2% during the quarter, with the average effective rent up 1.5% to $1,672 per month. Rents are up 2.3% asking and 3.1% effective from the second quarter of 2011.
  • This is another submarket with extensive development potential, and Reis predicts more than 3,200 units will be added here from 2012 to 2016, as the construction pipeline continues to swell. The first project to complete, the 250-unit 1233 Old Town, is now expected to finish next February.

Chicago/City West

  • More than three-quarters of the 22,761 units in the City West submarket are in the Class B/C segment. The second quarter vacancy rate here was 8.2%, the highest metro wide, and the average asking rent was $1,070 per month.
  • The vacancy rate fell 10 basis points in the second quarter, and is down 260 from a year earlier. The average asking rent rose 0.7% here during the second quarter, with the average effective rent up 0.8% to $1,020 per month. The year-over-year increases are 2.3% and 2.8%, respectively.
  • The 496-unit K2 apartment tower is expected to complete construction next March at 365 N. Halsted. It accounts for half the new supply forecast for this submarket in the 2013 to 2016 period.

Chicago/South Shore (South Loop)

  • The 39,163-unit South Shore submarket has the largest inventory in metro Chicago, and includes many of the city of Chicago’s poorest and roughest neighborhoods and the South Loop and Hyde Park areas, the latter the home of the prestigious University of Chicago.
  • The second quarter vacancy rate for the South Shore submarket is 4.9%, down 20 basis points during the second quarter and down 30 year-over-year. The average asking rent rose 1.1% during the quarter to $979 per month, while the average effective rent increased 1.3% to $892 per month. The year-over-year increases were 2.8% and 3.4%, respectively.
  • In May, the 137-unit (28 market rate) Park Douglas completed construction at 279 Roosevelt in the Loop. Net absorption for the quarter was 105 units. Reis predicts more than 900 units will complete here in 2013 and 2014, thought the 425 unit Haper’s Court in the Hyde Park area is the only project currently under construction.

Suburbs: North

  • The 22,676-unit Glenview/Evanston submarket has a vacancy rate of 2.6%, lowest among the submarkets, and an average asking rent of $1,093 per month. This submarket includes frontage on Lake Michigan.
  • The vacancy rate fell 30 basis points in the second quarter, and is down 170 from a year earlier. The average asking rent increased 1.0% and the average effective rent rose 1.3% to $1,036 per month during the quarter. The year-over-year gains are 1.6% and 2.2%, respectively.
  • Four apartment projects are under construction in this submarket, with three in Evanston, the home of Northwestern University. Reis predicts 724 units will be added here from 2013 to 2016.
  • For 22,197 units in the East Lake County submarket, also along Lake Michigan but farther north, the vacancy rate is 3.7% and the average asking rent is $988 per month.
  • The vacancy rate fell 30 basis points during the quarter and down 100 basis points over the year, as the average asking rent rose 0.9% and the average effective rent increased 1.2% to $971 per month.

Suburbs: West

  • In the 17,577-unit Oak Park submarket, due west of The Loop with both El and commuter rail service, the vacancy rate is 4.5% and the average asking rent is $998 per month.
  • The vacancy rate fell 20 basis points during the second quarter and 70 from a year earlier. The average asking rent increased 1.0% during the quarter, with the average effective rent up 1.2% to $939 per month. The year-over-year increases are 3.4% asking and 4.3% effective.
  • Farther west, the 20,408-unit Aurora-Naperville submarket has a vacancy rate of 3.6%, among the lowest in the suburbs, and an average asking rent of $1,158 per month, among the highest.
  • The vacancy rate edged down 40 basis points during the second quarter, and is down 70 from a year earlier. The average asking rent rose 1.8% with the average effective rent up 2.1% to $1,064 per month during the quarter. The year-over-year gains were strong at 4.3% and 5.2%, respectively.
  • Despite rising rents, development activity is quieter in the western suburbs for the moment.

Suburbs: South

  • The 20,113-unit Southeast Cook County submarket has a vacancy rate of 4.3% and an average asking rent of $830 per month, second lowest among the submarkets.
  • The vacancy rate was unchanged during the second quarter, and is down 70 basis points from a year earlier. The average asking rent increased 2.1% during the quarter, with the average effective rent up 2.4% to $820 per month. The second quarter was primarily responsible for the year-over-year increases of 1.5% and 2.5%, respectively.