Demand for rental units in the Chicago area has not kept pace with the torrid rate of apartment construction.
According to a second quarter report from Marcus & Millichap, vacancy rates in the overall metro area rose to 6 percent in the first quarter, up from 5.4 percent year over year.
The uptick in vacancy is due to the more than 9,000 units added in the Chicago area in the past two years, though the pace of deliveries was expected to slow to 7,400 this year.
In the city, the vacancy rate was up to 6.9 percent from 5.4 percent year over year, despite net absorption of 1,700 units. The suburban vacancy rate, meanwhile, rose from 5 to 5.4 percent.
“As a result of rising vacancy, rent growth has remained relatively flat during the past 12 months in the core,” the report said.
Effective rents in the overall metro area rose 4 percent to $1,420. While city rents held steady over the past 12 months at $1,791, suburban rents jumped 6.1 percent to $1,227.
Marcus & Millichap said the large number of completions could slow investor interest amid concerns of oversupply. Deal volume Downtown dropped slightly in the last 12 months, with fewer new or recently built residential buildings changing hands, the report said.
While the report projected a slowdown in deliveries, developers have plans to add tens of thousands of new units in the coming years, including the former Tribune Tower redevelopment from CIM Group and Golub & Co., Related Midwest’s former Chicago Spire site plan and The 78 project, Sterling Bay’s Lincoln Yards proposal and neighboring outposts along the south branch of the Chicago River from Lendlease and CMK Properties.