Chicago’s multifamily construction drought isn’t expected to improve any time soon, a report from Marcus and Millichap predicts.
By analyzing planned and ongoing multifamily developments, the brokerage predicts that this year Chicago is on track to see the smallest number of new apartments completed since 2012.
Less than 4,000 new units will be completed this year, according to the report.
The pipeline issue has been brewing for a few years. Chicago’s inventory of multifamily units grew at the fourth-slowest pace among major U.S. markets for the past three years, the brokerage found.
Part of that is due to higher interest rates and escalating construction costs. But it’s supercharged in Chicago specifically due to restrictive zoning, influence of aldermanic privilege over new developments, upheaval in the property tax system and investors’ and lenders’ fears of the city’s progressive policies. Among them are right of first refusal ordinances that are currently being tested in several neighborhoods.
The tight supply is good news for current multifamily building owners and sellers, but means competition is high among buyers, and developers will face less equity investment and lending.
As low supply has driven up rents in recent years, Marcus & Millichap predicts that trend will slow this year due to a slowdown in hiring that typically brings new professionals to the city.
Across the metro area, the 20 to 34-year-old renter population has been shrinking, according to the report.
The brokerage predicts that investment activity will continue to pick up along the North Lakefront-Rogers Park corridor in 2026.
Meanwhile, developers seem to be favoring the outer suburbs. Lake County-Kenosha is slated to receive the most new units in 2026, the report found.
An Interra Realty report from last year found that multifamily building sales in the Chicago suburbs were up 40 percent, year-over-year, in the third quarter, and a few outer-ring counties stood out in the competitive field.
Will County’s largest deal last year was the sale of the Lincoln Station Apartments. After a decade-long construction quest and an ensuing legal dispute, rescue capital lender 7 Acre Investments gave developer Richard Gammonley the green light to sell his newly built complex in New Lenox. Miami-based JSB Capital bought the 220-unit property from Gammonley and 7 Acre for $65 million.