Midwest Multifamily Suburban Chicago: A Healthy, Steady Apartment Market April 24, 2017

by Whit Annibali, Vice President of Investments

When the average person thinks of Chicago, they undoubtedly picture the heart of the city: the Willis Tower (formerly Sears Tower), Lake Shore Drive, shopping on the Magnificent Mile and, of course, the Cubs. For multifamily investors, however, the suburbs of Chicago hold a strong appeal.

Like many of its Midwestern counterparts, suburban Chicago’s multifamily market is characterized by steady operating fundamentals and dependable job growth. Even though the cost of acquiring an apartment community is higher in the Chicago area than in other cities in the Midwest, it is still lower than in the coastal markets, such as San Francisco and New York City, paving the way for higher returns than those found in the gateway cities.

Add it all up, and suburban Chicago is set to offer attractive opportunities for multifamily investors – now and into the future.

By the Numbers

Job growth is the lifeblood of apartment demand and when gauged by this metric, the Chicagoland area is in good shape. According to Marcus & Millichap, Chicagoland payrolls are set to increase by 1.5 percent, or 70,000 jobs, in 2017. That comes on top of a gain of 65,000 jobs last year.

Recently, there has been some concern over the growth in new construction in the suburbs of Chicago. Although development has increased over the past few years, the cost of new construction only allows developers to target the very highest end of the renter demographic, not the general renter population. Additionally, the pace of new deliveries is expected to decline in the next few years due to increased development costs for land, materials and labor as well as rising interest rates.

In fact, even with the recent increase in supply, rents in suburban Chicago saw a year-over-year increase of 3.7 percent in 2016, according to data compiled by Appraisal Research Counselors; meanwhile, the three-year annualized rent growth for Chicago’s suburbs stood 4.2 percent at the end of last year.

Looking ahead, the metro Chicago occupancy rate is expected to remain unchanged in 2017 and end the year at 95.4 percent, according to MPF Research.

A Strong Commitment

Given the underlying strength of the suburban Chicago multifamily market, we at JVM are committed to the area. Not only are our corporate headquarters located in Oak Brook, but we are looking to expand our Chicagoland portfolio as well. Currently, we own two communities in the region: Enclave at 127th in Plainfield and The Aventine at Oakhurst North in Aurora.

Furthermore, we have begun renovating The Aventine. Common-area improvements – which will include a fully renovated clubhouse and leasing office, an all-new state of the art fitness center, a new dog park and the installation of a 24/7 package room – are slated for completion this summer. Renovations to the apartment units, which will take place over the next couple of years, will include vinyl plank flooring, upgraded kitchen appliances, new lighting and hardware packages, and updated cabinets and countertops.

With the ongoing ability of the Windy City area to attract new residents and jobs, the future of the suburban Chicago apartment market is bright, and like JVM, the investment community is bound to continue to hold this region in high regard.