Appraisal Research Counselors reported Tuesday that Chicago’s downtown apartment construction boom is reaching a potential peak. New-apartment supply is exceeding demand, and rents are likely to start declining by fall.
On an annual basis, in 2016 average rents rose by 2.85% for Class A properties and by 4.13% for Class B properties. During the fourth quarter, however, across all apartment types, average rents fell by about 14.7%, down to $2.89 per square foot for Class A properties and $2.52 for Class B properties.
Ron DeVries, vice president of Appraisal Research, predicts Chicago’s apartment market could reach a peak in 2018, at which point supply will exceed demand and exert downward pressure on rents. He expects “a lot of angst in the market” and a sense of “a bubble” by the first quarter of that year:
There will be enough demand downtown to absorb 2,800 units in 2017 and 3,100 in 2018, but that's far short of the supply, according to the report. In 2016 there were 3,830 new units. In 2017, 4,100 are expected, and in 2018 an estimated 3,900 are expected.