RENTING IN CHICAGO? EXPECT A TIGHT RENTAL MARKET FAR HIGHER RENTS!

VACANCY RATES LOW CHICAGO AND ACROSS THE US – RENTS GO HIGHER!

Often counter to each other Chicago Rent Levels appear to be increasing at the same time much of the Real Estate Market is showing resurgence! Indeed some of the Rental Units for owners we represent have increased 5-10% at Lease Renewal time. As Rental Agents for our clients it seems these apartment and condo units rent to new tenants quite quickly some with multi-year leases. Also there is often little need to offer incentives or discounts to attract new tenants to existing rentals.

Nationally the trend toward tight supply and increasing rents is common across metro markets large and small. While Chicago currently has an estimated Vacancy Rate of around 3.7% the Metro Areas of New York New Haven San Diego San Jose and even the former Rust Belt City of Buffalo have seen Vacancy Rates below 2.7%. Historically vacancies less than 5% usually portend higher rents and fewer available units. Vacancy Rates are lowest in areas where the job market is vibrant and the economy is rebounding.

In a recent article in The Chicago Tribune Real Estate Writer Mary Umberger recently interviewed Ryan Servino Senior Economist at analytical firm Reis Inc. Although he sees Effective Rents (rents after Landlord Incentives are taken into consideration) up only about 1% in some markets many Metro Areas are experiencing far higher growth.

Servino calls the rate of rent growth in many markets nearing unprecedented levels – although Chicago is not the highest on his list.

One influencing factor involves the trend of adult children previously unable to find work in a weak economy now finding work to meet their educational qualifications. Often he cites young adults with a new job in hand tend to "leave the nest" in some cases fairly quickly. Indeed this "Boomerang Effect" where grown children come home to live while finding a job is easing somewhat.

Often during strong Real Estate and Rental Markets Developers overshoot market demand and tend to overbuild. Here in Chicago we encountered this overbuilding during our Boom Market 8-10 years ago especially in emerging markets like the South Loop and Near South Side. Here many newly-completed condo markets did not sell and some remained vacant and unsold for quite some time. Many were converted to rental apartments with heavy rental incentives to fill them.

Although overbuilding of Rentals is not currently an issue the possibility of too many rental units on the market may dampen demand to some degree. For the moment however – demand remains strong vacancies low and rents INCREASING.

Have a question on the Chicago Real Estate Sale or Rental Market in YOUR Neighborhood? Give us a call! We’re always here to help and offer advice.

DEAN MOSS and DEAN’S TEAM CHICAGO

Posted: Monday March 10 2014 2:07 PM by Dean Moss