Apartment Deals On The Horizon Downtown Despite Expected Tax Hikes
Chicago’s apartment dwellers should find some rental deals downtown this spring despite the gloomy forecast for higher rents this year.
However, analysts say owners of smaller North Side properties likely will be forced to pass along hefty rent hikes because they are anticipating extraordinary real estate tax increases when the second installment of the property tax bill arrives in August.
And, “Ma and Pa” landlords who own 2-flat to 4-flat buildings also will feel the sting of the new garbage collection fees, which will add hundreds of dollars to operating costs.
Higher property taxes and fees are needed to help the city raise $588 million in new revenue to pay for pensions of teachers, police and firefighters, according to Mayor Rahm Emanuel.
If there is one ray of sunshine in the city’s rental market, experts say it may be the glut of new apartment buildings such hot downtown neighborhoods as the Loop, West Loop, South Loop, River North, Streeterville, Gold Coast and Near North Side.
Appraisal Research Counselors reports that 16 new rental high-rises containing a total of 5,759 units are under construction downtown and scheduled for delivery in 2016 and 2017. The majority of the new 2016 units are expected to hit the market this summer.
Eight additional buildings are currently in the active lease-up stage. They include: the 509-unit Wolf Point West, the 469-unit 1000 S. Clark St., the 398-unit 340 E. North Water, and the 362-unit 845 N. State St.
“We are projecting another nine buildings with about 2,183 units to start construction during the first half of 2016 with 2017 delivery dates,” said Ron DeVries, vice president of Appraisal Research.
While the prospect of rising real estate taxes downtown is a major issue for developers, Appraisal Research noted that wealthy owners are counting on lowering assessment levels through aggressive Board of Review appeals by their lawyers, and lower final levels are expected.
As a result of the huge supply of new apartments and all the competition, rents in new downtown Class A and luxury buildings have been nearly flat—up only 1.42 percent over a year ago—on occupancy of 93.5 percent.
Average net rents in luxury downtown apartment buildings at the start of 2016 were $2.97 per square foot, while Class A buildings posted an average net rent of $2.81 per square foot.
However, elite new buildings are posting significantly higher net rents. For example, the 153-unit Walton on the Park on the Gold Coast has net rent of $3.79 per square foot, while 845 N. State St. is netting $3.68 per square foot, and Wolf Point West is at $3.53 per square foot.
In addition, about half of the new buildings in the lease-up stage are offering rental concessions, or deals.
“We have seen an increasing frequency of free rent being offered on top of revenue management quoted rents,” DeVries said. “Through revenue management vacant units are continually repriced up or down to reflect daily demand, particularly in new luxury buildings.”
Besides a month’s free rent on selected apartments or all units, downtown concessions also can include gift cards, and waiving or reducing move-in fees, or application fees.
For more housing news, visit www.dondebat.biz. Don DeBat is co-author of “Escaping Condo Jail,” the ultimate survival guide for condominium living. Visit www.escapingcondojail.com.