Multi-Housing News - October 2008 - (Page 20)

market report Midwest Market Cooling but Stable Average rents and occupancy rates are up in both Chicago and Kansas City By Ralph A. DePasquale & Phillip S. Brimble, CCIM, Hendricks & Partners LLC The heartland is posting fairly healthy reports this year for the multifamily sector. Many owners in Chicago and Kansas City have increased occupancy rates and posted rent increases over the course of the last 12 months. However, sales of apartment communities have been a different story in both locales due to credit issues and rising cap rates. In 2008, a number of Chicagoland apartment owners have seen continued improvement, or at least stability, in occupancies and even rent increases over the course of the last year, but the shadow market is poised to strike. Sales transactions of apartment communities, on the other hand, have been a different story. The credit crunch has led to a downturn in the volume of multifamily property sales in the first half of 2008. On the transaction Chicago metro average rent to $1,067 from $1,020. With slightly more than half of all metro apartment communities offering specials, concessions are on the rise. Downtown Chicago renters are being conditioned by apartment communities to onemonth free rent on a one-year lease, due to influential competition from the condo rental market, whereas the suburban submarkets are stronger, but are still inclined to advertise two weeks’ free rent. However, some Chicago neighborhood vacancy rates have approached 10 percent, while at the same time, a number of suburban areas recorded low, single-digit vacancy rates. The higher downtown vacancy was due in large part to condominium developments in these areas. Nearly 10,000 condominium units are set to be delivered by the close of 2009. Chicago’s downtown apartment owners will likely see the greatest impact as this onceshadow rental market is truly coming out of the darkness and becoming a greater force on the overall rental market. For example, the number of condominium units included in the rental pool increased by nearly 50 percent since last year. In contrast, suburban apartment development is very anemic, with fewer than 1,200 units slated in the collar counties. This lack of new units has helped existing properties, especially when coupled with 10 years of conversions that have taken thousands of units out of the rental market. Historically, Chicago has been a low-volume sales market, typically averaging 15-20 sales per year of 100+-unit apartment communities. This is a fairly small number given the size of the overall market, especially when you consider that some other areas of the country, such as Texas, might have been doing 90 deals a quarter. During the early- and mid2000s, things began to change and we did see an increase in sales. In fact, last year, there were approximately 38 sales of 100+-unit communities and buildings. It was also a record-setting year in terms of dollar volume, with some very large deals trading hands. This number was bolstered somewhat by sales of a number of Inland properties, at one time the largest owner in the area. In sharp Chicago Historical Vacancy & Rent Antheus Capital LLC developed Solstice on the Park, the first high-rise condo in Chicago’s Hyde Park area in decades. The 28-story tower, designed by Studio/Gang/Architects, features outwardly angled windows on its south façade for summer shade and passive solar warming in winter. side of the table, the apartment market can be summarized in a word: slowing. Operationally, apartment owners have benefited from fairly strong occupancy rates and even rent increases. According to a second-quarter apartment update, the overall vacancy rate hovered at 5.2 percent in the second quarter, and we saw rents increase by approximately 4.5 percent over the oneyear period ending in June of 2008. This was up from 3.7 percent a year before, propelling the contrast, 2008 has seen eight to 10 sales through August, with more than half of those done in the first quarter. We also saw a number of larger properties come to market in the spring, only to either not sell or be pulled from the market. It seemed that there needed to be some time for everyone to digest all that was happening on the credit side of the equation as lenders also figured out their game plans, some of which is still going on today. As a market, Chicago has also been fortunate not to be experiencing the amount of foreclosure activity that other parts of the country are seeing now. 20 October 2008 | Multi-Housing News | Producer of Multi-Housing World

Table of Contents for the Digital Edition of Multi-Housing News - October 2008

Multi-Housing News - October 2008
Contents
From the Editor
MHN TV Premieres
Market Pulse
Special Report: MHN 2008 Design Awards
Development & Design: Mirabella
Market Report: Chicago, Kansas City
Property Management: Tracking Residents’ Tech Wish Lists
Finance: Freddie Mac/Fannie Mae
Tech Report: Marketing Web sites
Products: Appliances

Multi-Housing News - October 2008