Chicago is an attractive, liveable, centrally-located city offering visitors and tourists alike the experience of world-class dining, entertainment and shopping. While the luxury rental market itself is rebounding from the initial uncertainty around COVID-19, we saw firsthand the impacts of the pandemic on residents and properties.
With 3,000 apartments in our leasing portfolio, Luxury Living Chicago Realty (LLCR) is an authority on marketing and leasing luxury properties in the Chicagoland area. Some of our notable exclusive leasing assignments include Wolf Point East, Wolf Point West, Logan, Panorama, River City Apartments, Norweta and One Oak Brook Commons.
While there was a narrative of urban flight during the pandemic, the concern was unfounded. During the pandemic, the majority of people who left the city were older millennials at the end of their rental cycle. They moved out of state or to the suburbs at an accelerated pace, catalyzed by the pandemic. Chicago’s new luxury renters are slightly younger and will likely continue to be renters for the next 5-7 years. These renters are willing to pay more for space and amenities as they are working from home and spending more time in their units and on-site. Gen Z is a population we’re watching closely to understand what resonates with them. These consumers were born between 1997 and 2021. So far, we know they are eco-conscious and community-driven.
Relocation Renters
During the pandemic, we saw the greatest rental impact from new renters relocating to downtown Chicago. Relocations accounted for about 40% of LLCR leases pre-covid. Relocations include new renters moving to Chicago from out of state or the suburbs. That number did not change during COVID, but what did shift was the composition of those relocation renters. Pre-COVID, the majority of relocation renters came from out of state. At the end of 2020, the majority of relocation renters came from the suburbs (25% of the 40%). In 2021, the number of relocation renters increased to 50% of all new leases with 35% of the 50% coming from out of state. The top five states where renters are coming from are Texas, California, New York, Ohio and Michigan. These states did not change during the pandemic or in 2021. When reviewing data on current renters up for renewal in 2020, there was a 10% increase in that universe of renters citing “leaving the city” as their reason for not renewing a lease. In 2021, the number of current renters leaving the city has returned to normal levels.
Pricing/Concessions
Downtown Chicago apartment rents dropped significantly in Q3-Q4 2020. Net effective rent prices decreased as much as 25% in some luxury apartment buildings from a similar period 12 month prior. However, with price decreases came a significant influx of renters who were able to secure extraordinary deals. As the market has recovered, pricing is now HIGHER than pre-pancemic levels and occupancy is at an all time high of 95%+ in most downtown luxury apartment buildings. We expect prices to continue to increase significantly for the next two years.
Pipeline
There are about 30,000 luxury apartment units in Chicago, and 25,000 of those units have been delivered in the last eight years. For the period of 2013-2020, there were an average of 3,500 new luxury units delivered annually.
- In 2022, there are only 650 new Class A units being delivered.
- In 2023, we project 2,200 units. There will not be enough units to meet demand. In turn, occupancy will remain and historically high levels and rents will continue to rise.
- By the middle of 2024, we will see significant multifamily deliveries, with most deliveries in the Fulton Market/West Loop area.
All of us in the luxury rental industry are closely watching the market as it continues to improve post-COVID.
For more information or questions about Chicago’s Class A multifamily market, get in touch with our team today and be sure to sign up to receive industry insights.
