Are developers worried that they might be adding too many apartment units to the city of Chicago? Construction activity here would suggest not, and so does the latest multifamily research report from Marcus & Millichap.
According to Marcus & Millichap’s fourth-quarter multifamily market report, developers will have completed 8,600 new apartment units in the Chicago area by the time 2017 comes to an end. The Streeterville/River North and Loop sections of the city will see the most new units, receiving about half of all multifamily deliveries.
What’s spurring all this construction? Marcus & Millichap points to apartment conversions. While plenty of developers continue to add new skyscrapers to the city’s skyline, many others are instead repurposing old office spaces into rentals. There is, after all, only so much land available in the core of the city.
Examples of this includle The Century & Consumers Buildings and the Insurance Center Building, a pair of projects slated to bring hundreds of apartments from converted office space.
Vacancies will rise this year, Marcus & Millichap said, but only because developers have added so much new apartment supply in recent years. Marcus & Millichap predicts that the apartment vacancy rate in the Chicago market will rise 50 basis points to 5.1 percent by the end of the year.
Despite that slight increase in vacancy, the average effective rent for apartments in the Chicago market will increase to $1,418 a month, a jump of 42 percent.
