Sparse New Development Applies Upward Pressure on Chicago Rents

Apartment hunters in downtown Chicago are paying more than ever — and finding fewer options.

Rents in top-tier downtown buildings climbed 6.4 percent year-over-year in the second quarter, with Class A units averaging $3.99 per square foot, or nearly $2,800 total for a typical one-bedroom, Crain’s reported. The rise comes as rising construction costs, stubbornly high interest rates and skittish investors keep new projects sidelined, leaving renters stuck in an increasingly tight market, according to data from appraisal and consulting firm Integra Realty Resources.

Developers aren’t rushing to fill the gap. Just one major project — CMK’s 149-unit building at 1717 South Michigan Avenue — was delivered this year. Only two more buildings totaling 440 units are slated for completion by 2026: a 132-unit project on the Near North Side by developer CityPad and a 308-unit tower in Fulton Market from a partnership of CRG and Shapack Partners.

A meaningful boost in supply isn’t expected until 2027, when Integra projects more than 2,300 units will finally come online. Vista Properties broke ground on a 31-story, 494-unit project in Fulton Market in recent weeks after landing a $173 million construction financing package. In the meantime, downtown vacancy, already at 3.9 percent, is on track to hit its lowest point in over a decade.

The imbalance is keeping renters boxed in. Elevated borrowing costs mean many would-be buyers are staying put, further juicing demand.

““We’re expecting to see continued rent growth because there’s just not many options in the market,” Integra’s Ron DeVries told the outlet, though he also said tightening occupancy and rising yields will eventually draw investors back.

Absorption numbers underline how much demand is outpacing supply. Nearly 1,000 units were absorbed in the second quarter alone, with more than 2,000 so far this year — a strong tally given the lack of deliveries. Renters are also seeing far slimmer pickings. DeVries noted that in the West Loop, a renter could once shop eight buildings for a one-bedroom; next year, they might find only three with vacancies.

The squeeze leaves landlords firmly in the driver’s seat. With little relief in the pipeline, Integra projects steady rent growth through at least 2027. For tenants, that means higher monthly bills and tougher competition. For investors and developers, it signals a market poised for stronger revenues, but financing gaps have to first be filled.

— Eric Weilbacher