Downtown Chicago Apartment Market Shows Signs of Slowing Down

Posted by Leo Clark. on Sunday, November 13th, 2022 at 11:25am.

Downtown Chicago ApartmentsWe’re beginning to see signs of a slowdown when it comes to rent hikes in Downtown Chicago’s apartment market. While living in one of Downtown Chicago’s high-rises is still relatively expensive, it appears rent hikes are easing.

According to data from Integra Realty Resources, net rent in a Class A apartment building in the third quarter of 2022 was up about 8.5-percent from a year ago. Even so, at $3.56 per square foot, it was down from the record high we saw in previous months. During the second quarter of the year, Integra put the price per square foot at $3.64.

That’s, of course, good news for renters who saw some rent prices soar more than 20-percent following the pandemic. Higher rents have also had an impact on inflation.

The rent hikes came as the economy began to recover from the pandemic. During 2020, rents and downtown occupancies fell for a period of time.

It didn’t take long for the market to come back, though. Class A rents shot up even higher than pre-pandemic rents by the end of 2021.

There’s also the matter of absorption, which is a way to measure demand. In the third quarter of this year, downtown absorption fell negative 74 units.

According to the appraisal and consulting firm, one reason has to do with development. When developers complete fewer apartments, as they did this year, it limits the number of new apartments that can be leased.  

Developers are only expected to complete 1,400 downtown units this year, but more than twice that many should be added next year. The downtown apartment market is tied, in part, to supply.

While apartment renters have concerns about rent prices, landlords have their own concerns. Last year, the county assessor hiked commercial building assessments in the downtown area.

That helped spark fears of major property tax increases. In an effort to somewhat limit the tax hit, the county Board of Review then came in and substantially reduced the assessed value of many downtown buildings.

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