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The Home Front

(Above) One-bedroom unit at Panorama Luxury Apartments in Chicago’s Lakeview neighborhood.

14-May-24 – Luxury apartment rents in downtown Chicago and on the Near North Side are on an upward elevator ride.

Rents for top-tier apartments rose 3 percent year-over-year, pushing the average monthly rent for a downtown Class A apartment above $3,100 for the first time ever, according to a new report from Luxury Living Chicago, a high-end apartment leasing firm.

The posh Streeterville neighborhood posted the highest average rents at $3,454, trailed closely by Gold Coast/Old Town at $3,445, and River North at $3,426, according to the report.

Aaron Galvin

“What we are seeing in Chicago is exactly what you would expect,” said Aaron Galvin (left), Luxury Living’s founder and designated managing broker. “A Midwest market that is seeing measured, sustainable rent growth due to supply and demand drivers.”

Galvin said he believes rent growth between 3 and 5 percent per year in Chicago is sustainable. However, developers who expect 10 to 15 percent year-over-year rent increases may be dreaming.

“Rents don’t grow to the sky,” Galvin said.

Young professionals in their late 20s or early 30s with high-paying jobs make up a large segment of the renter profile for these Class A buildings, Galvin said. The minimum annual income threshold for most of these apartments is $75,000, though the average income in the newer luxury buildings is about $120,000, he said.

An average of 4,000 new multifamily rental units have been developed in downtown Chicago each year since 2016, according to the report. But forecasts for 2025 and 2026 indicate the pipeline for apartment construction is drying up.

Developers are slated to deliver fewer than 500 units in 2025 and about 1,000 units in 2026 – well below historical averages, according to Luxury Living. Two years of minimal supply coupled with consistent demand will likely continue to drive rents up, Galvin predicted, and potentially spur developers to build.

A lack of upcoming supply likely may cause occupancy numbers to tick up to new highs by the end of next year, Galvin said. Luxury downtown apartment occupancy currently is at 94 percent, but the report projects occupancy to approach 96 percent by the end of 2025.

Rogers Park rent hikes coming?

In early April, The Home Front reported that apartment renters in the Rogers Park neighborhood should brace themselves for hefty spring and summer 2024 rent increases as a result of the lofty property tax reassessment numbers recently released by Cook County Assessor Fritz Kaegi.

Assessor Kaegi said 2024 assessed values of large multifamily apartment properties grew to $213.04 million (before appeals), up an exorbitant 46 percent from $145.63 million in 2023. In Rogers Park, large multifamily apartments drove a significant increase in assessed value in the township, Kaegi said.

In Chicago and Cook County, commercial properties are assessed at a whopping 25 percent of market value, while single-family homes and small apartment buildings are assessed at 10 percent of market value.

Rogers Park Township is bounded roughly by Lake Michigan on the east, Howard Street on the north, Ridge Avenue on the west, and Devon Avenue on the south. It includes about 800 commercial apartment buildings, each containing more than four units.

Experts say financially squeezed owners of both walk-ups and large mid-rise and high-rise apartment buildings in Rogers Park and other North Side neighborhoods likely will receive substantial property tax increases if they do not appeal the assessment hikes.

Chicago landlords selling out?

Based on current listing activity, some investor owners of large Chicago apartment complexes are not waiting to be hammered with skyrocketing property tax bills later this year.

Here are four new listings from Essex Realty Group and Kiser Group:

Panorama Apartments. This newer 140-unit apartment building at 918 West School Street in the heart of Wrigleyville is listed for sale by Essex Realty at $44 million. The property also features 8,492 square feet of retail space and 22 parking spaces.

1414 West Pratt Boulevard. This 45-unit vintage Rogers Park apartment building is listed for sale by Essex Realty at $4.35 million. The building contains one studio unit, 39 one-bedroom apartments, and five two-bedroom layouts.

Under-market rents on the one-bedroom units currently average $968 a month, while competing units in the neighborhood are leased for $1,200, Essex Realty said.

(Right) 1414 West Pratt Boulevard in Rogers Park.

Essex Realty Group

Jackson Park Portfolio. A three-building, 208-unit apartment complex at 7500 South South Shore Drive in the South Shore neighborhood is listed for sale at $18.6 million. The Essex Realty listing boasts that the recently renovated property is “within blocks of the future Obama Presidential Library site.”

5710 North Winthrop Avenue. Kiser Group recently listed this vintage 42-unit apartment building in the Edgewater neighborhood for a sale price of $7.2 million. The building features 25 studios and 17 one-bedroom units. The Kiser listing noted that the property has “rental upside with current rates around 15 percent below market.”

Kiser Group

So, is this a forecast of where rents are headed in 2024 in the Edgewater neighborhood?

(Left) 5710 North Winthrop Avenue in Edgewater.

• More info: Luxury Living Chicago