The Urban Core Is Driving Metro Chicago Rent Growth
Across many U.S. metros, apartment properties in or adjacent to downtown rank among the strongest performers right now. That’s certainly true in metro Chicago, with the pattern seen especially in the robust rent growth posted in The Loop. The Streeterville/River North and Lincoln Park/Lakeview submarkets also are experiencing notable pricing appreciation.
The Loop’s stock, almost all of it found in high-rise developments, registered effective rent growth for new leases just a hair under 12 percent between mid-2011 and mid-2012. In the Streeterville/River North area, annual rent growth came in at almost 6 percent. And Lincoln Park/Lakeview’s annual rent increase proved right around 5 percent.
In comparison, other locales in the metro logged rent growth averaging roughly 3 percent, with North Du Page County ranking as the only suburban submarket where the performance approached the hikes seen in the most urban spots. (Well, technically, the Northwest Indiana submarket also did well in terms of percentage growth, but Gary’s average monthly rents are less than half the total dollars commanded across other spots on the price growth leader board.)
While MPF Research anticipates reasonably solid rent growth in Chicago’s urban apartments during the near term, it’s highly unlikely that price inflation can be sustained at the very high levels recorded now. That expected shift in momentum primarily reflects the significant number of cranes you see dotting Chicago’s urban skyline. About four-fifths of the metro’s ongoing apartment construction is occurring in The Loop and Streeterville/River North submarkets. While quite a few of those properties still are in the fairly early stages of development, the flow of new product moving through initial lease-up looks like it will be enough to begin to cool rent growth by the second half of 2013.
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