High end Chicago rents downtown are surging thanks to slim supply and rising post-pandemic demand in an area hurt by shuttered shops and offices.
Class A rents jumped by almost a fifth in the first quarter to an average of $3.55 a square foot, Crain’s reported, citing real estate consultant Integra Realty Resources. Just 1,500 apartments came to downtown this year, the lowest in a decade, according to Integra, and the occupancy rate rose to 94.5 percent in the first three months of the year from 91.1 percent a year earlier.
Rising mortgage rates, which often push first-time home buyers out of the market, will probably keep rents high and demand up. Rents may rise another 5 percent this year, Integra’s Ron DeVries told the outlet.
“This is going to help tenant retention in a lot of these buildings,” he said.
Prices are also starting to increase at Class B properties, where prices average $2.92 a square foot. The increases will probably price many renters out of the downtown market, and DeVries said to expect those renters to move to the periphery neighborhoods around downtown.
Developers have announced plans to complete about 4,000 apartments next year and another 4,800 units in 2024, according to Integra. Rising interest rates and a looming recession could slow or stop those projects as lenders financing less development on the back of a slowing market.
“It certainly is harder with all those things going on,” DeVries told the outlet. “But there are still a lot of people that are looking to pound money into real estate. Real estate is still attractive.”
[Crain’s] — Miranda Davis