Crane, crane, go away – that’s what owners of existing luxury apartment buildings are saying. But more cranes keep dotting the skyline – each one of them hovering over yet another new construction luxury rental building. Not great news if you’re a landlord.
New apartment buildings are shooting up faster than renters can fill them. A recent report from Appraisal Research Counselors states that about 3,830 new apartments were made available in downtown Chicago this year, and they are projecting more than 4,000 additional units are on the way in both 2017 and 2018. According to Crain’s Chicago Business, the supply of luxury rental units is outpacing the demand for them, and will likely stabilize rent prices that have been consistently increasing year after year until now. It could even fuel a decline in downtown rental prices in the near future.
The explosion in new apartment buildings has led to the lowest occupancy rates in downtown Chicago rental units in 7 years, according to Curbed Chicago. Some newer buildings are even offering complimentary rent for the first 1-2 months to entice renters to choose them from the clutter of apartment options, although this tactic is common during the slower winter months
Worth noting: while luxury apartment buildings are struggling to keep up with the Jones’, class B downtown apartment buildings – the ones without game rooms, golf simulators, space flight simulators – are doing just dandy. These slightly older buildings are hanging in there with a 95% occupancy rate.
TBD how this will impact the condo market. While it has been a seller’s market the past few years, the tables could turn if would-be buyers opt to continue renting while prices are more stable. Alternatively, some rental buildings could decide to convert to condo buildings if there is more demand to own these units rather than rent them.
One thing’s for sure: with Millennials now the biggest generation on the books and Chicago’s downtown scoring one big corporate HQ relocation after another, there’s going to be a demand for some kind of housing.