The Chicago rental market has been on an upward swing since 2010. Downtown Class A rents are up 36% (on a per square foot basis) since 2009 according to Appraisal Research Counselors. But is the end near? I don’t know about you, but every time I speak with someone in multi-family or read an article regarding an apartment sale, I am feeling reminiscent of the 2005 and 2006 sales market. Before I go into a rant regarding the current state of the market, let us back up and discuss the rental market in Chicago over the past decade.

Rental prices sharply declined toward the tail end of the first decade in the 2000s for several reasons. When the economy was still ticking along rental prices remained flat or only saw nominal increases (in some cases decreases) due to the fact that mortgages were not only easy to come by, but cheap to get. Factor in increasing property values and the ability to gain quick equity and everyone and their dog was buying a condo. It made more sense to buy at the time and home ownership in Chicago was at an all time high (71.2% in 2006). Less renters and more buyers meant lower or flat rents and more vacancy in rental buildings. Once the economy started to soften at the end of 2007 and then drastically so in 2008 and 2009, we saw rents decline even further. The other item to remember is during the 2000s very little new construction apartment buildings were built. ALL developers were focused on condo buildings. In addition, some existing supply of apartment buildings were converted into condos (10 E. Ontario, 440 N. Wabash…think American Invsco and Crescent Heights). Now the year is the end of 2009 and 2010. People either 1) cannot afford to buy, 2) cannot get a mortgage or 3) are still hungover from the crash of the market and are afraid to buy. These people then are forced to rent. Remember what I just said about no new construction of apartment buildings in the past 10 years? Remember what I just said about apartment buildings converted into condos? Well, it doesn’t take a genius to figure out what happened – supply on apartments were low but demand was now high. Home ownership was dropping for the first time in decades and therefore rents started spiking.

Rent prices in 2007 and 2008 were quite low in Chicago. The rent increases of 2009 and 2010 and even 2011 were simply making up for lost time. Recovering back to where they should have been had the mortgage market not been flooded with such toxic mortgages that ended up contributing to not only the decline in rental prices but the collapse of the entire financial system. But then something strange happened…rents continued to increase and developers took note. Developers could not get a construction loan to save their lives to build a condo building, but if they wanted to build a 500 unit apartment building backed by secure rents…it was like stealing candy from a baby. Financial institutions could not wait to lend money to developers and developers could not wait to get back in the game.

Why would developers want to become landlords you ask? Are they not in the condo game? Don’t they want to sell? Well, here is a secret – developers are not in the landlord business. They have ZERO interest in being so. Once developers saw the increase in rents and what institutional investors were paying for these apartment buildings they knew they could build a building, with cheap money, partially fill it and then sell it off. Guess what – that is what almost all have done in Chicago. EnV (161 W. Kinzie), 111 W. Wacker, North Water Apartments…just to name a few, were all flipped for a big profit. Developers simply went back to what they knew how to do: build and sell.

The Chicago market LOVED it. After all there had not been any high end rental buildings built in quite some time and renters craved new construction. Each building that opened up after the next had better amenities and better finishes. Renters hopped from building to building and had no problem paying the exorbitant rents. Prices were increasing double digits year after year. Then more developers rushed in and we are sitting where we are today. The question we must now ask ourselves is “Is this market sustainable?”

Is this market sustainable? That is a good question to ask don’t you think? This was a question asked to developers in 2005 in which nearly 100% responded with “Yes….” and then gave some bullshit answer derived from misconstrued facts and skewed data. But, what about now? Will we see a market crash in rentals like we did before? Well…lets check out some facts.

Here is a list provided by Appraisal Research Counselors of new rental units added in downtown Chicago. Keep in mind we are only talking about downtown Chicago and only talking about top tier buildings.

2013: 2,750 units     2014: 2,000 units    2015: 3,100 units and projected in 2016 an additional 3,500 units and in 20017 an additional 4,500. 

This is only downtown Chicago. This does not count north side markets and this certainly does not count any suburbs.

Rents have continued to increase even as new supply has come on the market. There are many reasons for this. Millennials continue to rent as opposed to buy. Baby boomers are coming into the city and renting second homes or selling their home in the burbs and making their rental in the city their primary residence. Job growth in Chicago is steady (it is doing well, but not amazingly well) and lets face it, people love new construction. Home ownership has declined back to 1999 levels in the city of Chicago as well. These are all great factors and reasons why the market has done well, but this is not the only data that we should consider. The most important item to consider is the following: VACANCY. Vacancy is the ultimate determining factor. During the real estate boom of the 2000s the major factor that would have let you known the market was cooling off way ahead of a decline in prices was market time and number of homes on the market. We saw market time increase and number of homes on the market start to increase 1 year before pricing actually peaked. 1 full year…it goes to show you how slow the real estate market is to react to change. There are many reasons for this but the main reason is because most investors and many of us brokers in sales love to have blinders on and simply focus on only the good and not the bad. No one likes the bear in the room.

So, here is a fun fact for you. Apartment occupancy rates on a national level decreased for the first time since 2009 last quarter. Specifically in Chicago Class A (top tier luxury rental buildings) occupancy rates went from 94.2% in the 3rd quarter of 2014 to 93.7% in 2015. This may not seem like much of a change, only half a percent but it is drastic. In 2006 for instance, due to many apartment buildings being converted to condos, occupancy was at 97%. In 2007 and 2008 we saw occupancy dip to 91%. We are really only dealing with a small percentage range of occupancy between the lowest occupancy we’ve seen in a while and the highest. Therefore, a half a percent year over year is something to take note of.

So we have looked at occupancy and we saw it decline a nominal amount. What else should we be considering? Well, let us consider new units projected. Perhaps, if not many new units are coming online then the market will be fine.

Well, in 2016 and 2017 a total of 8,000 new units will be coming to market. This is more than 2013, 2014, and 2015.

During this winter I’ve seen more buildings offer concessions than I have in several years. I’ve seen rent prices at some buildings in downtown down 20% from their summer prices PLUS 1 month or 2 month concessions offered. Some will say “but prices always decrease in the winter.” While this may be true; what I would like to note is the amount prices have decreased this winter is more than years prior and the level of concessions have increased more than years prior.

Continue to bear with me here!

Restaurant Theory:  Pretend a new hot restaurant has opened up. During the “Hot” time of 6:30pm to 9:30pm getting a table is impossible. But you really want to try this restaurant so you go at an off peak time, maybe 5pm or 4pm or 10pm. You walk in and you notice how crowded the restaurant is during that off-peak time. You think wow, this restaurant is doing very well! Once that restaurant starts to loose its luster and is no longer as desirable any more, the first sign would be 4pm diners will stop dining. People will no longer wait until 10pm to eat dinner or want to start at 4pm because either 1) They don’t feel that inconvenient time is worth it or 2) They’re able to snag  reservations during peak times. Now, if you were just looking at the number of tables full between 6:30pm and 9:30pm you might think that restaurant is doing very well. You might think that the sky is the limit and this restaurant needs to expand! But what you’ve failed to realize is that there is already a sign right in front of you that demand is starting to taper off and that would be the fact that less diners are there during the less desirable times. If you only looked at the peak times then your understanding of the restaurant would be mistaken.

Obviously the rental market is very different from the restaurant business, but basic observations of supply and demand can be looked at in the same way. It is important to understand the leading indicators in the rental market. These leading indicators are occupancy rates (vacancy rates) and rent prices and concessions during the slow months of the year.

My Thoughts

If you’ve made it this far thank you for reading through my long winded blog. I’ll keep my thoughts short. The rental market party is over, plain and simply. It may take another 3 quarters for us to start to see price adjustments in the downtown market, but we will see price adjustments eventually. As occupancy rates continue to slide, especially among buildings that are now owned by institutional investors, they will have no choice but to lower rents or increase concessions to attract renters. I believe this will be most prevalent at the end of 2016 / beginning of 2017 as we head into next winter and see the new 2016 supply hit the market. Overall, I do not see a CRASH in rental pricing, but I do see a decrease on the horizon and I would not be surprised if we see rents decrease in Class A buildings by 10% over the next 2 years.


Rental Inventories DOWN all over Chicago – Wicker Park, Bucktown, Lakeview & More

Inventory levels appear to be down all across Chicago, at least as far as rentals are concerned. Last year around this time I would forward clients lists of properties. They would pick out the ones they like and I would make calls and send out e-mails to schedule appointments. Last year, roughly half the responses I would get would be “Sorry, this condo has been rented.” This year however there are not many places on the market that I can even call!

Let me give you a few examples. I just ran an MLS search for Wicker Park & Bucktown for rentals between $1,500 and $4,000/mo. That is a huge price range and should typically yield a decent number of results. Well, there are only 22 units on the market in Wicker Park and Bucktown in this price range many of which already have applications pending.

Other areas such as Lakeview and Lincoln Park are seeing the same problems; limited inventory. In a normal market this may mean that less people are moving and therefore there are less people looking. However with more people choosing to rent than buy demand continues to remain strong and inventory levels are dropping as many tenants are choosing to renew leases as opposed to take their chances with the fast moving rental market.

Absorption Rate: Absorption rate is a number that tells us how long it will take a market to absorb new units coming on the market. What we do is we look at how many units are currently available versus how many units have either rented or sold over a certain time period in order to figure out how long it would take to go through the current supply.

Lets take a look at some of the current absorption rates in some popular neighborhoods so you can see how quickly the rental market is moving. I’m using a wide but common price range of $1,500 to $4,000

Lincoln Park: 47 Units Available. 97 Units rented in the past 30 days which means there is currently only 14.5days of inventory on the market in Lincoln Park. In other words, if no new rentals come on the market there will not be any units available in 2 weeks.

Lakeview: 79 Units Available. 103 rented in the past 30 days which means there is currently 23days of inventory on the market.

River North / Gold Coast / Streeterville: 143 Units Available. 195 Rented in the past 30 days which means there is currently 22days of inventory on the market.

South Loop: 93 Units Available. 99 rented in the past 30 days which means there is currently 28.1days of inventory on the market.

Bucktown / Wicker Park: 22 Units Available. 39 Units rented in the past 30 days which means there is currently 17days of inventory on the market.

Lake Shore East: 22 Units currently available. 20 Units rented in the past 30 days which means there is currently a 32day supply of inventory on the market.


Paul Blackburn is a licensed Illinois Realtor & Broker with @ Properties Chicago. He can be reached via e-mail at


The rental market in Lakeview, and throughout the majority of the city saw a very strong 2011. During the “hot months” of the rental season, May through October, I saw multiple applications submitted on most rental properties I dealt with. During these times rental prices were up dramatically, in some cases by over 10 and 12%. The real question is, how did the market handle itself over the entire year including the winter months? Here is the data. To better under this data and why I am using it please quickly read this following blog I wrote previously concerning the leasing market in Chicago. HOW TO UNDERSTAND THE RENTAL MARKET IN CHICAGO


The Lakeview neighborhood is comprised of several areas including but not limited to East Lakeview, Boystown, Wrigleyville, Southport Corridor and West Lakeview. All these areas and everything in between were included in my search. The search area on the MLS is known as “8006.” Data was combed to exclude any “extreme” numbers as well as to exclude any listings that were rented before print or any listings with a market time of greater than 150days as these listings do not represent typical scenarios in the rental market.


2010   Units Rented: 515     Average Market Time: 32days    Average Price: $1,203.28

2011    Units Rented: 492     Average Market Time: 23days    Average Price: $1,288.00

Total Price Increase of 7.04% with Average Market Time declining by 9 days.


2010   Units Rented: 547     Average Market Time: 40days    Average Price: $1,719.39

2011    Units Rented: 782     Average Market Time: 29days    Average Price: $1,898.68

Total Price Increase of 10.43% with Average Market Time declining by 11 days. Also very interesting is that the number of units rented increased by 43% yet we still had a substantial decrease in market time as well as a substantial increase in price.


2010   Units Rented: 259    Average Market Time: 38days    Average Price: $2,321.22

2011    Units Rented: 355    Average Market Time: 29days    Average Price: $2,479.89

Total Price Increase of 6.84% with Average Market Time declining by 9 days.

When we look at this data what does it tell us? The most important number we want to look at is Market Time. Market Time will always be the first to change when supply and demand shifts. Prices will change after a sustained period of increased Market Time. Market Time will always shift from month to month as some months are more popular for renting than others. If we were to  break the data down month by month we would want to compare October 2011 to October 2010 for example, as opposed to October 2011 to September 2011.

What does all this mean for the 2012 rental season? In my opinion the 2012 rental season will remain very strong. I believe we will see moderate price increases, however not some of the double digit growth we saw last year. If we just look at the numbers you might say I’m wrong. Look at the 2 Bedroom data. We saw an increase in price by 10% plus an increase in supply by 43% and a decrease in market time! Just looking at these numbers one might say “Well, if supply doesn’t increase at all we very easily could see an additional 10 or even 15% increase in price again.” If Lakeview was an isolated market, then yes this could be true. However, we must take our blinders off and consider other neighborhoods as well such as Buena Park, Uptown, Anderonsville, Edgewater, and others that can be comparable substitutes for those looking in Lakeview. It is these substitute areas that will help absorb some of the demand from Lakeview as renters get priced out.


Paul Blackburn is an Illinois licensed Realtor and Broker with @ Properties in Chicago. His experience ranges from new construction development, condo conversion and luxury restorations to residential leasing and sales throughout Chicago. He has served as an expert witness on both residential and commercial property values and has been interviewed by numerous sources such as Fox News Chicago and the Chicago Tribune.  CONTACT PAUL AT ANYTIME FOR ASSISTANCE SEARCHING FOR A NEW HOME, TO SELL OR LEASE AT PAUL@PKBLACKBURN.COM

How to Understand the Rental Market in Chicago

As with any free market the forces of supply and demand control the market. In Chicago leasing we have two types of properties: Institutionally owned apartments (typical large rental buildings) and privately owned condos. As a Realtor it is very easy for me to track the data of privately owned condo rentals since the majority are reported real time on the MLS. From experience, I also find privately owned condos a much better indicator of the health and stability of the rental market. The reason for this is that an individual owner is affected much quicker and greater by changes in supply and demand than a hedge fund that may own a 500 unit building. Here is an example:

If a single owner has a unit up for rent for $2,000/mo and it is vacant for 2 months, this is $4,000 in lost income which equates to 16.67% decrease in their yearly revenue.

If an apartment building that has 500 units and 5% are vacant for 2 months, this would only equate to a loss of 10% of their yearly revenue.

An individual owner wants to get money as quickly as possible because they may only have 1 or 2 units. If the individual owner lowers her rent by 10% it only affects that individual unit or others in the building; but what does she care? She doesn’t care if other units in the building lower their rents to compete with her, she only cares that her unit is rented quickly. Whereas if an apartment building started to lower rents on 25units out of 500, the lower rent may become the new “standard” for that building putting the rest of their revenue at risk.  A 500 unit building has a vested interest in leaving a unit vacant for an additional month and foregoing current cash-flows in order to keep rents in that building at a certain level. The loss of cash today will be made up tomorrow.

It is for this reason above why I find the individual condo market a LEADING indicator of the rental market versus the institutionally owned apartments which I consider a lagging indicator.

Soon to be posted, on the Rental Statistics tab will be my comparison of 2011 rental data by neighborhood versus 2010. I have compared a full year of data by unit size using number of bedrooms. I have eliminated  any listings on the market for over 150days as well as any listings that were never on the market for rent and only placed on the MLS to give MLS credit. Since we cannot verify the true market time for these listings they were not included.

There are 3 stats that will be compared with each neighborhood year over year and they are: Number of Units Rented, Average Market Time, and Average Rent Price. Since I have personally eliminated any “extreme” data I find the average price to be more accurate than the median price.