Commercial Real Estate News / General CRE / Q3 2022 Multifamily Report: Chicago, IL

Q3 2022 Multifamily Report: Chicago, IL

Published: 02-07-23 Category: General CRE

Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.

Q3 2022 Multifamily Report: Chicago, IL

Q3 of 2022 in Chicago, Illinois’ multifamily market saw record-high rent increases, plummeting vacancies, and increased migration among aging millennials to the suburbs. Chicago employers continue to expand their payrolls, coming close to their 2019 job creation figure.

Multifamily vacancies in Chicago currently sit at nearly a full percentage point below 2019’s pre-pandemic low. Net absorption of multifamily units sits at nearly 2,000 above Chicago’s five-year trailing average and nearly 8,000 units above the twelve months that precede July 2022.

It’s clear that housing trends in Chicago, IL as of Q3 2022 favor the multifamily sector as rising interest rates coupled with inflation continue to push prospective homeowners out of the market.

What Are Multifamily Rents Like in Chicago, IL?

Multifamily rent growth throughout 2022 surged in Chicago, IL: Average effective monthly rent sits at nearly $1,900 as of Q3 2022, a reported burden to Americans living in the city.

The mean rent in Chicago proper scaled up to nearly $2,200 a month, while mean suburban rent reached nearly $1,600 a month.

This is the second consecutive year of strong rent growth that Chicago has experienced, pushing average effective rents into historical highs. We surmise that 2023 will start to correct and moderate rent growth back down to seasonal averages: Year-to-date changes in Chicago’s effective rent since Q3 2021 are currently down.

Multifamily Net Absorption in Chicago

New multifamily completion in Chicago in 2021 slightly declined from 2020’s completion levels; yet, net absorption in Chicago’s multifamily sector skyrocketed to nearly 7% in 2021, nearly 400 basis points above 2020’s net absorption rate of about 3%.

As of Q3 2022, multifamily net absorption has moderated to around 4%, a year-to-date decline, yet vacancy rates still remain at all-time lows despite national net negative quarterly absorption.

Despite these indicators, vacancy rates will likely continue their downward trend in Q4 2022.

Chicago’s Q3 2022 Multifamily Investment Highlights

Average price per multifamily unit in Chicago reached nearly $180,000 in Q3 2022 among increasing sales velocity. Some other multifamily investment highlights in Chicago include:

Relatively flat cap rates remaining largely unchanged since Q3 2021 at around 6.5%;
A year-to-date increase in average price per unit in Chicago’s multifamily market by nearly $10,000 per unit;
Improving property performance metrics bolstering investor confidence; and
Frequent trading of Class A, B, and C multifamily properties among select submarkets.

The submarkets that experienced the most frequent Class A trading include South Loop, Streeterville, and Fulton Market; Class B and C property trading also maintained frequency in these submarkets.

Class A, B, & C Multifamily Property Pricing

In submarkets where Class A property trading was the most frequent, the average price per unit was as high as nearly $330,000. In similar markets where Class B and C property trading was the most frequent, price per unit reached averages of around $250,000.

Multifamily properties in suburban areas of Chicago are priced lower than their metro-area counterparts yet are still attracting considerable investor interest amidst record-low suburban vacancy rates.

Multifamily Development Activity in Q3 2022 Chicago

A very small number of multifamily units is expected to reach completion by Q4 2022, notching Chicago’s multifamily inventory up by barely 80 basis points. This lack in completion will help stimulate activity in existing structures as supply still struggles to meet Chicago’s multifamily demand.

Methodology

All figures presented in this article are based on MyEListing.com’s commercial real estate listing data in corroboration with other freely available data and information covering the commercial real estate industry.

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