$1,765 2Q 2024
2.4%
95.5% 2Q 2024
30 BASIS POINTS
3,632 [YTD: 6,604]
2,684 [YTD: 5,794]
QUARTERLY DEMAND
QUARTERLY COMPLETIONS
The Chicago multifamily market has seen a positive trend in demand, with renters absorbing nearly 1,000 more units than were brought online during the second quarter of 2024. Year-to-date, demand has risen to 6,600 units compared to the 5,800 units developers have delivered this year. Downtown Chicago and the North Lakefront have emerged as primary demand centers, accounting for 38% of the market’s total absorption over the past year. In contrast, submarkets experiencing more move-outs than move-ins have been hardest hit by the loss of manufacturing jobs over the past decade and year. These challenged regions are located in the market’s southern and southeastern areas, as well as the manufacturing hubs near O’Hare Airport.
Chicago’s high taxes and complex entitlement process are key factors contributing to the tightness of its housing supply. Unlike nearly every other top 50 metro, which saw supply expansion from 2022 onwards, Chicago’s multifamily construction levels have steadily declined over the same period. In fact, current under-construction levels are approximately 40% below their peak. As of June 2024, there are 8,100 units under construction, with activity predominantly concentrated in the Downtown and North Lakefront submarkets. Approximately 3,000 units in these two residential nodes are expected to be delivered over the next few years.
Strong demand in the Chicagoland area led to the absorption of 6,604 units in the first six months of 2024, boosting the average occupancy rate across the market to 95.5%, which surpasses the market’s ten-year annual average of 94.6%. Historically, Chicago’s overall occupancy rate has trailed the national average, but in the most recent quarter, it exceeded the national figure by more than 150 basis points. This shift began in 2022, as multifamily markets across the U.S. experienced rapid inventory expansion, while development in Chicago remained more restrained. As a result, Chicago now ranks fourteenth nationally for the highest occupancy rates and tenth for units absorbed over the last year. Nearly all submarkets recorded occupancy rates above 95% in the last quarter, with more than 85% of submarkets showing year-over-year improvements in occupancy levels. This suggests that Chicago is less affected by oversupply issues compared to other U.S. markets.
In the first half of 2024, Chicago’s rental market saw a 2.4% annual increase in effective rental rates, elevating it to among the top 12 markets in the second quarter among the 50 largest markets. This boost raised the average rent for new leases to $1,765 by the end of the second quarter. This period marks the first time in over a decade that Chicago has consistently surpassed the national average in rent growth, maintaining this trend since late 2022. Across most of its 43 multifamily submarkets, Chicago reported positive rent growth over the past year. Notably, submarkets with inventories exceeding 10,000 units, which recorded the highest year-over-year rent growth, saw little to no expansion in inventory during the last 12 months. Conversely, the Northeast DuPage County and University Park submarkets were the only two to experience year-over-year declines greater than -1%.
Average Monthly Mortgage Payment
Average Monthly Rent
In the first half of 2024, individual conventional multifamily transactions in the Chicago Metropolitan area reached approximately $764 million, marking a 36.7% decrease compared to the same period last year, with 40 properties changing hands. This decline underscores a cautious investment climate amid stringent financial conditions. However, there has been a noticeable increase in interest from institutional investors, who have comprised 27% of the buyer mix this year, up from the five-year average of 22%. This shift suggests that the dry powder which has been sidelined over the past two years by this investor class might be mobilized in greater quantities in the near term.
*Most Active Buyers and Sellers are based on the sale volume of apartment units.
* Trailing 4Q average PPU
* Preliminary Data from RCA – Individual transaction $2.5M +
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Under 35 Years
|
35 to 44 Years
|
45 to 54 Years
|
55 to 64 Years
|
65 to 74 Years
|
75 to 84 Years
|
85 Years & over
|
|---|---|---|---|---|---|---|
|
0.2%
|
-0.9%
|
-0.9%
|
0.5%
|
0.8%
|
0.2%
|
0.0%
|
The 65-74 age group is the fastest expanding renter demographic in the Chicago-Naperville-Elgin metro area, showing a 0.8% growth from pre-pandemic 2019 to 2022. This suggests an increasing demand for rental housing that caters to an aging population.
Chicago’s apartment market in 2024 maintains a cautiously optimistic outlook, with 5,141 units expected over the next four quarters—a decrease from the 9,500 units delivered over the previous 12-month period. Supported by a robust job market, which added 12,000 new jobs year-over-year as of May 2024, the city is well-positioned for increased household formation. Should the economy maintain its current trajectory, this job growth is anticipated to underpin apartment market fundamentals throughout the rest of the year. Further boosting Chicago’s economic prospects, significant investments such as Loop Capital Real Estate Partners’ $100 million film studio and The Chan Zuckerberg Initiative’s $250 million commitment to a biotech hub underscore the city’s status as the Midwest’s capital and a key investment hub, ensuring sustained job creation and economic vitality.
