Tag: luxury apartment rent prices

Luxury Living consistently tracks leasing data on larger assets in Downtown Chicago’s Class A Market built after 2016. This dataset currently includes 72 properties and over 23,000 total units—and counting. These properties set the tone for the entire market. 

Tracking leased rentals as opposed to available units (asking rents) shows what is actually happening in Chicago multifamily. 

Seasonality Strikes Again

September marks the first full month of the seasonality dip, but Q4 is where property owners feel the most decrease. Fewer renters are looking for apartments during this time, and even with seasonably high concessions, the volume simply isn’t there. 

There were just over 1,900 rentals in Q4, which is a 40% decrease from Q3 (2,700 rentals). For even more context, there were nearly 3,500 rentals in Q2—nearly twice as many rentals as Q4. 

The above chart clearly illustrates why an optimized lease-expiration schedule is so important. An optimized expiration schedule not only maximizes revenue, but ensures the right inventory when renters are looking for apartments. 

South Loop Regains the Top Spot

In Q1 2023, South Loop had the top spot in total rentals, but since that time West Loop/Fulton Market shot to #1 in Q2 and Q3 due to the high number of lease-ups that launched this year. As the West Loop/Fulton Market buildings stabilized, South Loop returned to #1 on the list in Q4 2023. 

In 2024, there are lease-ups in ALL submarkets except River West and Loop/Lakeshore East. West Loop/Fulton Market will likely take the top spot again in Q2 and Q3 2024 with six lease-ups and 1,800 units delivering. 1000M, with 738 units in the South Loop, may have something to say about which submarket ends up number one in leasing volume in 2024.  

Lease-ups Take Away

No submarket had a bigger drop in quarter-over-quarter volume than West Loop/Fulton Market. There were five lease-ups in 2023, and most hit stabilization in Q4. The leasing frenzy in Q2 and Q3 came to an abrupt halt and saw a steep decline of 47% from Q3 to Q4. The next closest volume drops were in Loop/Lakeshore East (-32%) and River North (-30%). 

Technically, River West had the steepest decline (-51%), but it was only 3% of the volume for the quarter. 

Streeterville was nearly even at -1.5%, and Gold Coast/Old Town did not see a significant dip, only down 9.4%. 

Average Gross Rents vs. Net Rents

The Average Gross Rent for the market in Q4 was only $62 lower than Q3. How is that possible? Answer: Concessions. 

As the market starts to feel the burn of seasonality, the first reaction is to start offering concessions to help increase leads, traffic, and rentals. Then the comps start to also offer concessions, so more concessions are offered to stay ahead—eventually leading to 2 months of free rent, 6 months of free parking, waived admin fees, and a delicious fruit basket. 

Five of seven submarkets only showed an average gross rent difference of -$34 from Q3 to Q4. The average SF in Q4 was slightly higher at 790, while Q3 was 761 (+29), so average SF was not a major factor. 

West Loop/Fulton Market was slightly higher, which makes sense. Properties in lease-up generally never lower gross rents, but will add heavy concessions to help reach stabilization. In Q4, most of the West Loop/Fulton Market lease-ups offered 1 to 2 months free.  

For the remaining submarkets with mostly stabilized assets, revenue management software was adjusting rents down slightly to keep up with the market while also offering additional concessions. 

Concessions will start to disappear in Q1 for stabilized assets, while properties in lease-up will keep at least one month free to ensure higher velocity. Gross rents will remain steady in January and February, and we’ll start to see the first bump in rents in March as it kicks off the busy season in Chicago. 

The question is: How much growth can we expect to see in 2024 for this asset class? Chicago was among the strongest cities in the country in 2023, and we remain confident the growth trend will continue in 2024 and beyond. 

At Luxury Living, we not only provide data, but analyze the data to help inform developers and capital partners to make the best decisions on pricing strategy, unit mix, and amenity programming.

 

Click Here to Download our Q4 Chicago Class A Multifamily Market Update

Luxury Living consistently tracks leasing data on larger assets in Downtown Chicago’s Class A Market built after 2016. This dataset currently includes 70 properties and over 23,000 total units—and counting. These properties set the tone for the entire market. 

Tracking leased rentals as opposed to available units (asking rents) shows what is actually happening in Chicago multifamily.

 

The Power of Lease-Ups

When comparing the total rentals by submarket in Q2 2023 to Q3 2023, it’s inevitable to see a drop-off. Q2 is historically the highest-volume quarter of the year.

But, when there is a submarket with five lease-ups like there was in West Loop/Fulton Market, let’s just say that has some serious pull.

The average of all submarkets combined for a drop in leasing volume of 21%, while West Loop/Fulton Market held strong, and was UP 6% over the previous quarter. 

This is what happens when five lease-ups are simultaneously duking it out for renters heading into the slowest part of the leasing season—the dreaded September + Q4. 

Concessions were a major factor for these lease-ups, and it shows how impactful they were compared to the six other submarkets.

In Q2 2023, lease-ups contributed 31.8% of the total rentals in the West Loop/Fulton Market submarket. In Q3 2023, this number jumped to 42.5% of all leasing volume in West Loop/Fulton Market.  

With eight lease-ups launching in Q4 2023 through 2024—2,000 more units—it’s more than likely this trend will continue.

 

The Slow Season Cometh

Luxury Living has always defined the “busy season” in Chicago as March through July…and half of August. These months are when the vast majority of leasing occurs throughout the year. 2023 was no different.

March through July is really the peak, where 66% of the total rentals occurred during these 5 months. The drop-off in September is always expected. But, just like temperatures falling from mid-70s to low-40s, we’re always somehow shocked when it happens.

The market will hover in the 500 to 800 range until March of next year. No matter what revenue management software attempts to do, there just aren’t enough renters looking for apartments in September through February to make a dent.

 

What are People Renting?

One of the most important data points in Chicago multifamily is tracking leasing trends by unit type. There are so many factors that play into this, whether it’s single renters or couples leasing more units, a rise in relocations to Chicago, rents spiking, which impacts affordability and qualifications, to a myriad of other economic factors.

As rents rise during peak leasing season in Chicago, renters will have to choose between a larger apartment in an older building, perhaps sacrificing location, or a smaller apartment in a new property, in their desired location. Budgets and wish lists can be like oil and water. 

Comparing Q2 to Q3 2023, 1 bedroom apartments had the largest change in market share, rising from 49% to 54%. 1 bedrooms are generally in the 45% to 50% range, so to see this unit type above 50% is above average.

The average 1 bedroom gross rent in Q3 was $2,754 (Average SF: 716 / Average PPSF: $3.85). Of the 1,465 1 bedroom rentals in Q3, 694 had a square footage of 716 or lower (47.4%), while 771 had a square footage larger than 716 (52.6%). 

As rents increase around the city, studios and convertible rentals have been on the rise over the last few years due to affordability. 

The average studio/convertible gross rent in Q3 was $2,177 (Average SF: 525 / Average PPSF: $4.15). Renters paid an average of $576 more (+27%) to live in a 1 bedroom that’s 191 SF larger (+36%). 

While the average gross rents for 1 bedrooms remained consistent in Q3, staying within the range of $2,718 to $2,772, the studios/convertibles saw the biggest drop from July to September.

There was only a 1% drop in gross rents from July to August, but a 6% drop in gross rents from July to September. The square footage was still very close—519 vs. 530—which makes the drop in gross PPSF from $4.26 PSF down to $3.95 PSF even more impactful. 

This is why Q3 can be so misleading. July and half of August are generally solid leasing months in Chicago, but September is a bit of a wet blanket, always ruining the party. 

As seasonality causes havoc in the market, it’s critical to understand why this is happening, and how to prepare for it. Whether that is staying ahead of the market with concessions, or optimizing a lease-expiration schedule, there is always a way to stay ahead when you know what’s coming. 

At Luxury Living, we not only provide data, but analyze the data to help inform developers and capital partners to make the best decisions on pricing strategy, unit mix, and amenity programming.

 

Click Here to Download our Q3 Chicago Class A Multifamily Market Update

Luxury Living consistently tracks leasing data on larger assets in Downtown Chicago’s Class A Market built after 2016. This dataset currently includes 68 properties and just over 22,000 total units—and counting. These properties set the tone for the entire market. 

Tracking leased rentals as opposed to available units (asking rents) shows what is actually happening in Chicago multifamily.

 

The Big Three

Consistent with Q1 2023, the top three submarkets—West Loop/Fulton Market, South Loop and River North—had 69% of the total rentals in Q2 2023.

The biggest difference in Q2 2023 is West Loop/Fulton Market taking the #1 spot over South Loop. In Q1 2023, South Loop had 20% more rentals than River North, and 28% more rentals than West Loop/Fulton Market. This is quite a shift.

West Loop/Fulton Market is getting stronger by the day. Lease-ups in this submarket contributed 31.8% of the total rentals this quarter.

 

A Record-Breaking Quarter

While Gold Coast/Old Town didn’t have quite the volume, it far-surpassed its competitors on a gross PPSF basis, achieving an astounding $4.39 PSF in Q2 2023. That is 6.1% higher than the second-highest achieved PPSF in the market at $4.14. It’s also 11.6% higher than the market average.

This marks the first time four submarkets surpassed $4.00 PSF on achieved rentals in a single quarter. 

There is still substantial disparity for South Loop, but gross PPSF did rise 5% from a low of $3.41 in Q1 2023. 

What’s more, when South Loop is removed from the set, the average for the market rises to $4.04 PSF.

 

What are People Renting?

One of the most important data points in Chicago multifamily is tracking leasing trends by unit type. There are so many factors that play into this, whether it’s single renters or couples leasing more units, a rise in relocations to Chicago, rents spiking, which impacts affordability and qualifications, to a slew of other economic factors.

Historically speaking, 1 bedroom rentals equate to 45–50% of the total in Chicago, while studios & convertibles usually range closer to 20–25%. The shift in the market over the last few years is 2 bedrooms are starting to fall below 20% of the total rentals in the market. 

Why is this happening?

The average rent for a 2 bedroom in Q2 2023 was just under $4,300, which is the exact same average gross rent in Q2 2022.

To qualify for the average 2 bedroom, based on income of 3x the monthly rent, an individual would need to make $155,000 per year. Yes, couples often lease 2 bedrooms and have dual income, but the idea is to attempt to save money—the average rent compared to the average qualifying income is 33.1%. 

32% of the 2 bedrooms leased in Q2 had a gross rent $4,500 or higher. The average for this group of units was $5,212, and to qualify would require an individual income of $188,000. 

1 bedrooms, which consisted of 49% of the total rentals in Q2 2023, had an average gross rent of $2,825 and an average SF of 723. The smaller SF is a trend that is consistent, but that also means these units are less likely to be leased by couples. To qualify for the average 1 bedroom, an individual would need to make $102,000 per year. 

As rents continue to rise, Chicago multifamily needs to continually consider demographics to ensure the inventory in the pipeline not only meets renter demand, but affordability does not impact absorption. 

At Luxury Living, we not only provide data, but analyze the data to help inform developers and capital partners to make the best decisions on pricing strategy, unit mix, and amenity programming.

 

Click Here to Download our Q2 Chicago Class A Multifamily Market Update

Luxury Living consistently tracks leasing and availability data on larger multifamily assets in Downtown Chicago’s Class A Market built after 2016. This dataset currently includes 68 properties and just over 22,000 total units. 

Tracking leased rentals instead of available units (asking rents) shows what is really happening in Chicago multifamily. 

The following data covers leasing data from January 1, 2023 through May 31, 2023. 

 

Gross Chicago Rentals — By Month

In the first five months of the year, 5,054 units have been leased in this segmented market. This chart below matches expected Chicago seasonality, where January and February are two of the lower-leasing volume months and the market starts to pick up in March. 

There is an 83.4% increase in monthly volume when comparing January to May.

While January and February saw very similar leasing volume, it’s been a consistent climb each subsequent month this year. 

 

2023 Peak Rental Season

While month-over-month data shows consistent increases, week–over-week data illustrated in the chart below shows leasing volume likely peaked in mid-April.

Leasing volume is always about when renters are looking for an apartment, not when they are moving in. Renters in April and May are looking to move 45–75 days in advance. There is a big difference between peak leasing season and peak move-in season.

 

How does leasing volume impact gross rents?

The answer: Not much.

So far, the average gross rent in 2023 is $3,040. 

The biggest gap in rent from the average is January (-$109), and the biggest gap from the peak ($3,125) compared to January is $194 (-6.6%). The overall trend is showing the gross rents this year have minimal variance, which indicates a stable market. 

High occupancy and above-average retention is the most likely reason for this consistency. Often we see average square footage (SF) variance but each month has been relatively consistent.   

There is more to learn when viewing this by gross PPSF.

 

Despite the steady decline in weekly rentals, the gross rents and gross PPSF in May were extremely strong, achieving an average of $4.00 PSF with just over 1,300 rentals. 

Not only did May surpass April by $137 in gross rent, but the average gross PPSF was also 2.8% higher, despite an average increase of 13 SF. 

 

Chicago Rent Prices in 2023

As occupancy remains high, gross rents will continue to increase slightly through the end of the summer. In 2022, we saw weekly volatility starting in June, but average gross rents didn’t really see a consistent dip until the end of September. 

Rents are likely to remain in the $3,000+ range for the next 3-4 months, and gross PPSF is also likely to remain high as well ($4.00+ PSF). 

The one data point to track is going to be weekly leasing volume. We’ll see some impressive rents, but it will be based on fewer and fewer rentals until the Bears play the Chiefs on September 24. 

Pro Tip: July 4th Week is going to be weird. It falls on a Tuesday, so the volume that week is going to be low. No need to overreact, it will bounce back the following week.

 

Disclaimer:
The material in this report is protected by copyright and cannot be reproduced without the express written permission of Luxury Living Real Estate Data compiled in this report is collected from several resources and analyzed by Luxury Living Real Estate and is provided to accurately communicate the status of this comp set to the best of our abilities.

Luxury Living consistently tracks leasing data on larger assets in Downtown Chicago’s Class A Market built after 2016. This dataset currently includes ≈70 properties and just over 22,000 total units. These properties set the tone for the entire market. 

Tracking leased rentals as opposed to available units (asking rents) shows what is actually happening in Chicago multifamily. Furthermore, showing how the average gross rents compare to the average SF is equally important, as PPSF has a major impact on how a property is perceived in the market.

 

Q1 2023: The March Leap

January, February, and March include two of the slowest months of the year (January and February), along with one of the busiest (March), which makes Q1 appear to be stronger than it is. The key is to break down the data by month to understand the trajectory.

There is a 49% increase in total rentals from February to March which signals the kick-off to Chicago’s busy season. And also why comparing Q4 2022 to Q1 2023 doesn’t really tell much of a story. January and February are similar to Q4 while March is much closer to Q2 in velocity.

 

Volume Control

Of the seven prime downtown submarkets, two-thirds of the volume occurs in three of them: South Loop, River North, and West Loop/Fulton Market. West Loop/Fulton Market has three lease-ups that contributed 176 rentals to the total in Q1, which is 33% of these three neighborhoods’ total absorption. 

Look for West Loop/Fulton Market to take the second spot on this list for Q2 now that all three properties are no longer in pre-leasing environments.

 

Digging Deeper

 Average Square Footage

Reporting average gross rent without context can be misleading. One would think that Streeterville had a substantially better Q1 than River North, but when the average SF is 175 lower (-23%), it shows the smaller unit types dominated River North vs. larger unit types in Streeterville. 

Percentage of Studio – 1 Bedroom Rentals:

• River North: 80%
• Streeterville: 63%

The 175 SF difference between River North and Streeterville equates to $549 per month. Without the context of average SF, this data could be quite misunderstood.

 

South Loop: Ceiling or Floor?

Despite the high-end, amenity-driven properties built in the South Loop since 2016, this submarket continues to remain flat.

In Q1 2022, the South Loop was at $3.36 PSF. A full year later, this submarket has only increased $0.05 PSF (+1.5%). By contrast, West Loop/Fulton Market rose from $3.77 to $4.00 PSF (+6.1%) over the same period of time. 

South Loop had the highest volume of rentals in the market (26%), but the lowest PPSF. 

On a gross rent basis, South Loop is more in line with River West than West Loop/Fulton Market, despite significantly taller buildings with more view premiums. 

 

How much is this impacting the market? 

When South Loop is removed from the data set, the average PPSF for the market jumps from $3.80 to $3.94 (+3.7%). 

This is significant information as investors look at Chicago as a whole. 

 

Loop/Lakeshore East: Missing the Middle?

Loop/Lakeshore East has four properties performing extremely well, averaging $4.05 PSF. The remaining properties, however, average $3.08 PSF—a difference of 31.2%. 

This isn’t being skewed by Average SF either. The bottom 3 properties average 791 SF while the top 4 average 846 SF (+55 SF).

This submarket shows the high-end can perform, especially properties closer to the lake and Michigan Avenue. Proving the point, it’s all about where you build, not what you build. 

This gap also opens the opportunity for the $3.50 PSF option which leads to more momentum for office-to-residential conversion. 

At Luxury Living, we not only provide data, but analyze the data to help inform developers and capital partners to make the best decisions on pricing strategy, unit mix, and amenity programming.

 

Click Here to Download our Q1 Chicago Class A Multifamily Market Update

Luxury Living consistently tracks leasing data on larger assets in Downtown Chicago’s Class A Market built after 2016. This dataset currently includes ≈60 properties and just over 22,000 total units. These properties set the tone for the entire market. 

Tracking leased rentals as opposed to available units (asking rents) shows what is actually happening in Chicago multifamily. Furthermore, showing how the average gross rents compare to the average SF is equally important, as PPSF has a major impact on how a property is perceived in the market.

 

Q4 2022: Seasonality Impact

As expected, lease volume in Q4 decreased significantly from ≈2300 leases in Q3 to ≈1700 leases.

 

Despite the 25% reduction in total rentals from Q3 to Q4, this was 10% less of a reduction as compared to the decrease from Q2 to Q3, where the volume of rentals decreased 35% quarter over quarter.  In the last two quarters, the amount of leases has dropped a combined 60%. In other words, the amount of volume in Q2 (the most active time of the year) compared to Q3 and Q4 is substantial.

Seasonality impacts Chicago apartment velocity as much as any city in the country.

 

Q3 vs. Q4 — Rental Data

Considering the reduction in total rentals, average gross rents only decreased by 6.1%. Historically speaking, this is less of a decrease than we typically see in Q4. 

Higher gross rents were able to be achieved because of higher occupancy. The average occupancy for this dataset was ≈94%. This allowed leasing/management teams to limit significant reductions in rent while maintaining occupancy. Minimal new deliveries in 2022 helped boost occupancy on stabilized properties. This trend should continue in Q1–2023. 

Average gross rents decreased in all seven downtown submarkets in Q4. The below table shows the variance in average gross rent from Q3 to Q4 by neighborhood submarket.

 Average Gross Rent

• River West saw the biggest decrease in gross rent, dropping $248 (-9.9%).
• Loop/Lakeshore East had a very minimal decrease of only $47 (-1.5%).
• Four downtown submarkets saw gross rent decreases of 8.0% or more.

 

Digging Deeper

 Average Square Footage

The average SF in Q4 remained very consistent compared to Q3. The largest decrease in average SF was River West (-31 SF) and the largest increase was Loop/Lakeshore East (+36 SF). Square footage variance compared to Q3 was immaterial. 

Overall, the average SF was only down 4 SF (-0.5%).

 

Q4 = More Square Footage for Better Value

While the average SF did not vary from Q3, renters were able to get more bang for their buck in Q4 in select submarkets. 

The South Loop is a prime example. Renters were able to lease an apartment that was 24 SF larger while paying $162 less in rent. 

West Loop/Fulton Market renters leased nearly identical inventory (-13 SF) at a $131 discount (-4.5%). 

This is purely a factor of seasonality in Chicago, and why optimizing the lease-expiration schedule is one of the most important aspects of managing a Chicago Class A multifamily property. 

One Bedrooms Continue to Dominate

One-bedroom rentals have remained steady over the years, generally making up 45 to 50% of all rentals annually. Q4 was no different:

Studios/efficiencies continue to increase in demand, making up 27.3% of the total rentals in Q4. As gross rents continue to increase, this unit type will be more in demand based on income qualification. 

A single renter would need to make $24,747 more per year to qualify for the average 1 bedroom ($2,739) compared to the average studio/convertible ($2,051). 

At Luxury Living, we not only provide data, but analyze the data to help inform developers and capital partners to make the best decisions on pricing strategy, unit mix, and amenity programming.

 

Click Here to Download our Q4 Chicago Class A Multifamily Market Update

Luxury Living consistently tracks leasing data on larger assets in Downtown Chicago’s Class A Market built after 2016. This dataset currently includes ≈60 properties and just over 22,000 total units. These properties set the tone for the entire market. 

Tracking leased rentals as opposed to available units (asking rents) shows what is actually happening in Chicago multifamily. Furthermore, showing how the average gross rents compare to average SF is equally as important, as PPSF has a major impact on how a property is perceived in the market.

 

Q3 2022: Quality Over Quantity

As expected, leasing volume in Q3 decreased significantly from ≈3,500 leases to ≈2,300 leases. 

Despite the 35% reduction in total rentals from Q2 to Q3, Chicago multifamily remained extremely strong on an average gross rent basis, rising from $3,037 in Q2 up to $3,117 in Q3 (+2.7%). 

Seasonality impacts Chicago as much as any city in the country, but high occupancy and retention made it possible for rents to actually rise in Q3 as rental volume dropped by more than one-third.

 

Q2 vs. Q3 — Rental Data

Average gross rent increased in four downtown neighborhoods and decreased in three neighborhoods. The below chart shows the variance in average gross rent from Q2 to Q3 by neighborhood.

 Average Gross Rent

 

• River North saw the largest increase in average gross rent, rising $283 (+8.7%). 
• Gold Coast/Old Town had the largest decrease in average gross rent, dropping $317 (-9.1%).
• Despite the major fluctuations, the average gross rents increased $81 in Q3.

 

Digging Deeper

• River North had a huge increase in average rents in Q3 when compared to Q2, rising $283 on average.

• • Why? 
    • Average rents for 2 Bedrooms increased $439 (+9%), rising from $4,429 to $4,868.

• Gold Coast/Old Town had the largest decrease in average gross rent, dropping $317 (-9.1%).

• • Why?
    • With fewer ultra-premium units leased in Q3, the average 2 Bedroom rent dropped from $5,029 in Q2 to $4,254 in Q3 (-15.4%).

 Average Square Footage

A common perception is that higher gross rents mean higher square footage. This data proves that is not always the case.

Digging Deeper

• South Loop had a substantial $149 increase (+5.5%) in average gross rent, while only showing a difference of 31 SF.

• • Why?
    • Average gross rents for 2 bedrooms rose $203 on average, while accounting for 5% more of the total inventory leased in Q3 than Q2.

• The Loop/Lakeshore East spike of 108 SF (+14.3%) and gross rent increase of $113 (+3.8%)?

• • Why?
    • There were 3x as many 3 bedroom rentals in Q3 compared to Q2, with an average gross rent increase of nearly $800.

• The average SF in Streeterville was nearly identical, while the average gross rent dropped from $3,656 to $3,474 (5.0%):

• • Why?
    • All unit types saw a rent decrease, but a $1,299 (-17.7%) drop in average gross rent on 3 Bedrooms had quite an impact.
    • 1 Bedrooms, which represented 57.3% of the total Streeterville rentals in Q3, saw a rental decrease of 7.6%, while the 1 Bedroom average SF was nearly identical to Q2 (796 vs. 784).

 

At Luxury Living, we not only provide data, but analyze the data to help inform developers and capital partners make the best decisions on pricing strategy, unit mix and amenity programming.

 

Click Here to Download our Q3 Chicago Class A Multifamily Market Update