MARKET SNAPSHOT
Chicago’s limited inventory growth, particularly compared to its national peers, reinforces its over-absorbed status heading into 2025. Notably, the city’s peak year for construction activity occurred well before the COVID-19 pandemic, reaching its highest level in 2016. By the end of 2024, the number of units in the construction pipeline was 61% below the previous peak and 50% below the market’s 10-year average. The under-construction inventory represents just 1.2% of the existing units and is expected to decline further due to a significant drop in construction starts, which fell to just 3,625 in 2024—35% lower than 2023 and well below the historical average of approximately 8,600 units. As a result, CoStar projects a 40% decrease in new completions in 2025, leading to significantly reduced competition throughout the market.
While recent completions have remained concentrated in the Downtown and North Lakefront submarkets, with over 4,000 units delivered in these areas over the past year, exurban developments are now outpacing the North Lakefront pipeline. Submarkets such as North Will County and South Lake County, Indiana, are experiencing notable growth, with apartment inventories expanding by over 10%, adding approximately 1,035 and 700 units in 2025, respectively. Despite this growth, these areas, along with nearly all other submarkets in Chicago, are projected to achieve occupancy gains in the coming year. This highlights that the new supply has not been extensive enough to adversely affect the performance of existing properties.
Demand in the Chicago multifamily market remains strong, with nearly 9,900 units absorbed in 2024. The occupancy rate stands at 95.3%, exceeding the 10-year annual average of 93.7% and the all-time average of 93.1%. Historically, Chicago’s overall occupancy rate has been lower than the national average, but it is now over 200 basis points higher.
This significant shift in demand began in the second half of 2022, coinciding with a nationwide surge in multifamily inventory. Unlike many U.S. markets that faced oversupply issues, Chicago experienced only modest growth in its apartment stock. Among the nation’s 50 largest multifamily markets, Chicago currently holds the sixth-highest occupancy rate. While its absorption levels are only moderately higher than the historical norm, the market’s decline in move-ins is largely attributable to fewer move-outs compared to its national peers. These factors are expected to lead to slight increases in occupancy in 2025.
Absorption rates for North Lakefront and Downtown Chicago in 2024 aligned with their pre-pandemic five-year averages (2015–2019). This performance is particularly notable for Downtown Chicago, which has experienced significant growth over the past decade. Downtown’s demand trajectory reinforces this growth story, maintaining a stable occupancy rate of 94% in 2024, with a projected increase to 95% in the coming year. In contrast, the submarkets facing the most challenges, with more move-outs than move-ins, are primarily smaller-than-average residential areas in the market’s southern and southeastern regions. These areas have been most affected by the loss of manufacturing jobs over the past decade.
Chicago’s year-over-year rent growth of 2.6% in 2024 was more than double the national average. This marks the first time in over a decade that Chicago has maintained a higher rent growth rate than the national average. While this growth rate is not exceptionally high, it reflects steady and stable trends. Unlike less-established markets that may have expanded too quickly or face significant shortages in apartment inventory, Chicago’s rent trends are characterized by consistency, avoiding the dramatic peaks and valleys seen elsewhere. The market’s measured multifamily development is expected to push its rent-growth trajectory beyond 3.5% by the end of 2025.
Most of Chicago’s 43 multifamily submarkets experienced positive rent growth over the past year. Submarkets with above-average projected rent growth for 2025, such as Southern Cook, and Western McHenry Counties, have faced minimal supply-side pressures. These areas are expected to see annual rent gains near 5% by year-end, as their 12-month completion rate as a percentage of inventory is below 1%, and they have no units currently in the pipeline. In contrast, submarkets with a higher concentration of under-construction inventory may see below-average rent increases. However, even these areas are expected to achieve growth rates that remain above the national average.
12-month period ending November 2024
While many U.S. multifamily markets face challenges such as declining absorption, slowing rental growth, and elevated construction and delivery volumes, Chicago stands out as a national leader. Its measured supply, high occupancy rates, and strong move-in metrics are underpinned by robust demand fundamentals, which are expected to sustain the market’s strength through 2025.
Occupancy rates continue to exceed historical norms, with the average rate projected to rise slightly from 95.3% in 2024 to 95.5% by the end of 2025. Rent growth, already more than double the national benchmark at 2.6% in 2024, is forecasted to surpass 3.5% in 2025. This increase is driven by strong renter demand and a shrinking supply pipeline. Nearly all submarkets are estimated to see rent gains, with areas such as Far North Suburban Cook and Southern Cook Counties leading due to minimal supply-side pressures.
Chicago’s construction pipeline is shrinking rapidly, with completions projected to decrease by 40% in 2025 compared to 2024. This reduction in new supply is likely to further tighten the market, supporting continued rent growth and stable occupancy rates across nearly all submarkets. While recent completions have been concentrated in Downtown and North Lakefront, exurban submarkets like North Will County and South Lake County, Indiana, are experiencing notable inventory expansions.
Overall, Chicago’s measured approach to multifamily development, combined with strong demand fundamentals and a favorable economic outlook, positions the market for sustained growth. This balanced supply-demand dynamic is expected to solidify Chicago’s status as a top-performing metro in the U.S. multifamily market through 2025.
