- Chicago rental vacancy rate forecasted to reach 3.9 percent by the end of 2016.
- Relocation of major corporations to Chicago is helping to add jobs and fuel demand for new homes.
- Chicago remains a strong market for investors with a strong cap rate.
It may have taken a while, but the Chicago rental market is slowly pulling itself out of the recession. HomeUnion recently released a second quarter report on the city’s current and future economic and real estate health, and things are looking up in the Windy City.
The improving job market and relocation of several large corporations to downtown is helping fuel the demand for apartments and driving down vacancy in Chicago, the report says. By the end of 2016, vacancy is expected to fall 10 basis points from last year to 3.9 percent, while rents continue to climb.
Rents have increased steadily while vacancy has remained fairly flat; rents are expected to climb 4.6 percent to an average $1,972 per month.
The growth of the rental market is largely saturated in downtown neighborhoods like River North and The Loop, but future growth is expected to spread outside of the city’s urban core.
According to the report, investors in the first quarter of 2016 were seeing returns in the mid-7 percent range. The median price of an investment transaction was $113,300 and the leveraged price was $196,000 in Q1 of 2016.
Where does HomeUnion suggest the next thriving Chicago markets will be? Neighborhoods with good transportation, such as Lakeview, Lincoln Park and South Cook County markets, are expected to be on the list.
Job market growth
McDonalds recently announced that it is planning to move its massive Oak Brook headquarters to Fulton Market, but the fast food giant is one in many making such a transition. Kraft Heinz is also moving 250 employees to the Aon Center, and ConAgra is moving to the Chicago Merchandise Mart.
The construction of the new Wrigley Field and surrounding open-air attractions has already added construction, leisure and hospitality jobs.
Manufacturing, mining and logging sectors are the only industries reported to see an annual fall. Leisure and hospitality ranked in the top spot for annual change with a 5.8 percent increase, followed by construction at 5.2 percent and government at 2.3 percent.