Count the owner of downtown Chicago’s redeveloped Old Post Office among urban office owners that have branched out into the booming suburban multifamily market.
An affiliate of New York’s 601W bought a new 112-unit building at 1350 East Ogden Avenue for $24 million from a venture led by local apartment developer Michael Zaransky, Crain’s reported.
601W, which put $800 million into renovating the Old Post Office after buying it for $130 million in 2016, joins downtown office landlords including Ameritus that have turned their attention to suburban multifamily while the apartment market is hot and the office market is limited amid hybrid work preferences.
Rents in the suburbs have jumped back to pre-pandemic levels and beyond after slumping in the earlier months of the health crisis and new investors are leaping into the market, propelling developers such as Zaransky’s MZ Capital Partners, which profited on the sale of the building completed last year, Zaransky told Crain’s. It has other apartment projects moving forward in the suburbs of Buffalo Grove and Mundelein.
“There’s just not enough supply for the demand out there,” Zaransky told the outlet. “Rent growth has been amazing.” The property is fully leased and rent prices are 19 percent above this time last year.
The Naperville property is 601W’s ninth multifamily property, mostly bought in the last two years, including the $86 million purchase of Buckingham Place, a 267-unit property in northwest suburban Des Plaines. Its other multifamily markets include New Jersey, Miami and Atlanta, and 601W also owns downtown Chicago office buildings Aon Center and the Civic Opera Building.
JLL brokered the sale to 601W.
While rising construction costs have presented a growing threat to new development, it will keep getting overcome by rent growth, Zaransky said.
“I don’t see any scary stuff on the horizon,” he said. “Rising construction costs “have been an issue, but, frankly, rent growth has compensated for it.”
[Crain’s] — Sam Lounsberry