It’s common knowledge that the volume of Class A luxury multi-family developments has dramatically increased over the past few years and not just in the city either. The Chicago suburban market has also seen a rise of large, luxury apartments but what effect does this have on Class B and C owners?
Luxury suburban rentals have experienced great success in leasing; not only rents per square foot but also in lease-up timelines. This has had a dramatic upward effect on rents, many exceeding $2 per square foot which is record breaking for sustainable rents in the suburbs. The unintended beneficiaries of all these new multi-family developments are the private landlords of Class C apartments throughout the greater Chicagoland area.
Class A pricing has proved unreachable for many quality tenants who then turn to Class B apartments where rent increases are more modest. This demand then cascades to the Class C market. In the past three years, I have rarely seen a rent roll under 95% occupancy over the entire Chicago suburban market. Not only are occupancies healthy, rents are growing swiftly. A few years ago, $1 per square foot was a good rule of thumb for most of the suburban Class C market. These days, depending on location and condition, I’m seeing rents much higher than that and with good quality tenants.
So don’t let the flashy stories about new Class A developments distract you – the better story is the result of a strengthening Class C apartment market. Investing in good, quality housing for working class people in suburban Chicago has never looked better.
John Meyer
Senior Managing Director