Chicago Luxury Apartment Market Update from Aaron Galvin
On Wednesday, March 3rd, Luxury Living Chicago Realty hosted a virtual conference. CEO Aaron Galvin, Director of Leasing Strategy Mark Ziemke and Director of Residential Rentals Tristen Heimann shared industry insights with the over 300 attendees that joined live. In addition, the event featured a View From the Trenches panel with Hines’ Will Renner, Related Midwests’ Tricia Van Horn and Fifield’s Jon Schneider, moderated by Aaron Galvin.
“The pandemic has brought us together in a unique way. Whether you’re a developer, industry colleague, renter or anyone else, we have all experienced similar feelings of fear, uncertainty, confusion and now, hope, as we live through a pandemic. As we move forward, it’s going to take listening, empathy, respect, courage, grit and patience to restore the downtown Chicago luxury apartment market to prominence.” – Galvin
Starting in July, LLCR saw a significant decrease in rents and occupancy in the multifamily industry. Chicago and more specifically the downtown luxury apartment market in Chicago, is already rebounding.
In fact, the top three properties in LLCR’s exclusive leasing portfolio were still at $4.17 PSF in Q3 2020, when the overall Class A market dropped to $2.89 PSF.
“Renters will pay for the best of the best and even in a pandemic, and this has held true. As we advise future developers on what to build moving forward, we are most bullish on the ultra luxury rental market.” – Galvin
There is minimal supply coming to downtown Chicago. Developers and investors who are able to secure financing and take the risk of building are going to win.
“By 2023, I would not be surprised to see the newest properties delivering at or above pre-pandemic levels. And by 2024, he expects to see a $4.50+ PSF building.” – Galvin
In only 60 days, LLCR has leased 550 units.
“To put that into perspective, in January and February last year, we leased 284 units, and the market was very strong. This is a 93% increase.” – Galvin
LLCR saw a low of $1,858 average net rent in the first week of the year. Since that time, average rent has increased a cumulative 24% with last week at $2,328 per month. This is a welcome departure from the last six months and provides every opportunity to incrementally increase rent prices for the next 90-120 days as the spring leasing season kicks into high gear.
The luxury renter socio-economic composition has not changed. Credit worthiness, income levels, previous residence and even the percentage of people relocating to Chicago has remained unchanged in LLCR’s data from 2019 to 2020.
“For the most part, these are renters who maintained employment through the pandemic, were able to work remotely and are most likely to have increased compensation (and disposable income) as the economy recovers. These are the qualified renters we have always had in these properties.” – Galvin
There’s one dynamic that has materially changed – the number of new renters living in each building. Because of the increased vacancy in the portfolio of properties, LLCR is exclusively leasing and subsequent rent decreases, there are more newly moved in renters in nearly all of LLCR’s properties right now.
These people rented during the pandemic and much more accepting of the current constraints such as amenities on a reservation system and longer wait time for elevators.
“These new renters are GOLD because they’re excited about living in your properties. And we need to keep them with this same warm and fuzzy feeling they have right now. This will certainly help create harmony today as we continue to navigate this pandemic but the care, compassion and collaboration we put in now will have a material impact on retention efforts in the future.” – Galvin
“Our developers are going to continue to have the benefit of our relationship. This includes extraordinary amounts of data and strategy to help navigate this constantly evolving landscape.” – Galvin
LLCR’s exclusive leasing portfolio consists of various types of Class A properties from the newest most upscale lease-ups to stabilized properties and even condo deconversions. In addition, the brokerage firm is currently consulting for a number of developers on the verge of securing financing for future skyline changing ultra-luxury multifamily developments.
LLCR’s data is helping firms secure financing and maximize future revenues.
“There is nothing more important than providing the highest level of service for our clients and this community. Market intelligence is the key.” – Galvin
Looking for more of the data? Check out this blog recap of Mark Ziemke’s Data Report.
Thank you to everyone that participated in and attended the Chicago Luxury Apartment Market Update.
Luxury Living is here to help you in all aspects of multifamily development. From pre-development consulting to marketing and leasing, we are Chicago’s multifamily leasing expert.
