Compared to major cities on the coasts, Chicago remains an affordable option. But all things are relative so Chicago residents—or those looking to relocate here—will find that different neighborhoods offer diverse options when it comes to cost of living.
A neighborhood price index created by Nestpick looked at the rental burden not only city to city, but from one street corner to the next. In terms of the rent per square foot, nine of the top ten priciest neighborhoods were in San Francisco, ranging from $5.66 per square foot for a single renter in the Hayes Valley/Tenderloin/North of Market area all the way up to $6.96 per square foot in Financial District South.
Chicago doesn’t have rents anywhere near those heights, though there is still variety neighborhood to neighborhood. Of the nine communities that Nestpick ranked in Chicago, the most expensive one for a single renter was River North, where rents averaged $3.64 per square foot. Compare that to Ravenswood and Rogers Park, where rents were $1.96 and $1.91 per square foot, respectively.
“As companies and cities battle to attract a highly skilled workforce, the reality of disposable income and cost of living has become more important than mere salary alone,” said Ömer Kücükdere, managing director of Nestpick.
Other Chicago neighborhoods fell within that range. The market rate price-per-square foot in various neighborhoods broke down to $3.31 in Near North, $3.33 in South Loop, $2.37 in Lakeview, $2.31 in Lakeview East, $2.30 in Logan Square and $2.07 in Edgewater Beach.
Focusing on Class A product, Luxury Living Chicago Realty (LLCR) recently analyzed 18 high-end rental properties where the brokerage firm is the exclusive leasing provider. The data, taken from first and second quarter 2019 numbers, provides a fuller picture of the dynamics and demographics driving Chicago’s Class A renters.
“We are frequently asked about who is renting these luxury units and how they can afford them. People moving to Chicago for high-paying jobs in the urban core are driving this absorption,” said Aaron Galvin, founder and CEO of Luxury Living Chicago Realty. “As long as jobs continue to abound in Chicago and companies keep investing in this world-class city, we are going to continue to absorb the Class A apartment inventory.”
Diving into the LLCR portfolio data, the 936 Class A renters had an average income of $108,214, renting 856-square-foot apartments on average. The price-per-square-foot for these was $3.35 in the first half of the year, up from $3.14 in the same period last year. The average apartment size in LLCR’s portfolio also rose year-over-year, up from 821 square feet.
Nearly a third of those relocating to Chicago arrived from one of 36 states. California, New York and Texas brought the most renters to Chicago followed by neighboring Midwest states Indiana and Michigan. The average income for all people relocating to Chicago was $132,372 per year—a 22 percent increase, or $24,215, more than the LLCR portfolio at large. While the pipeline of Big 10 and other Midwestern graduates does residents to Chicago, large, coastal metros like Los Angeles, San Francisco and New York City are relocating talent to Chicago as well.
“In comparison, rents are still attainable here compared to the coasts and Chicago has nearly everything you can get in those other major cities,” said Galvin.
While there seems to be a steady stream of young professionals following jobs to Chicago, this generation is starting form families. In fact, couples occupy more than 60 percent of the apartments in the LLCR data set. This cohabitation doesn’t necessarily equate to unit size, as couples rented two-thirds of all of the one-bedroom units in LLCR’s 18-property portfolio.
“Couples are driving the rents in Class A apartment buildings as their combined income can afford the largest units with the best views,” said Mark Ziemke, leasing strategy manager at LLCR. “Moving in together is an exciting step for couples coming together. More often than not, they start their search looking for a two bedroom apartment but quickly realize they are not going to save money if they go that route. Instead, selecting a one-bedroom unit with enough living space and storage is the better choice.”
The average rent for a one-bedroom apartment in the LLCR portfolio is $2,587 as compared to a two-bedroom unit at $3,663 per month. By saving over $1,000 a month on average with a one-bedroom apartment, couples can be more particular about where they choose to live, opting for new units in the most prime location with the best amenities and views.
The LLCR data shows it’s essential for developers to build a healthy mix of unit types. Couple-friendly, one-bedroom units featuring walk-in closets and double sinks in the bathroom are vital to attracting the large base of renting couples.
“Combined incomes will allow for higher rent prices and increases upon renewals,” said Galvin. “Couples are also more likely to remain in their unit versus an individual renter.”