Chicago Apartment Rents Skyrocketed 30% Downtown In 2021
Chicago renters had better buckle their seat belts this spring because the apartment market is going to take them on a roller-coaster ride.
According to the national “April Rent Report” by ApartmentList.com, rents in Chicago rose 12.5% in 2021, and a similar boost could be on the horizon for 2022.
Chicago rents rose 0.8% in March, pushing the median cost for a standard 1-bedroom unit to $1,285. A typical 2-bedroom layout in the city now rents for $1,416.
However, Chicago rents are still a bargain when you compare them to New York City, where rents skyrocketed 35.5% to $2,101 for the average apartment in 2021 from $1,575 a year earlier. Another over-the-moon market is San Francisco, where the median rent on a 2-bedroom apartment now is $2,730.
Rent growth in the Windy City soared in 2021 when the pandemic drove up prices rapidly, especially downtown, where rents rose more than 30%, according to a new report by Integra Realty Resources, a consulting and appraisal firm.
A 1,000-square-foot luxury (Class A) apartment in downtown Chicago rented for $3,370 per month at the end of 2021, up from $2,550 in 2020, when pandemic-battered landlords were offering huge incentives.
Integra reported that the net rent at high-end Class A buildings in such ritzy neighborhoods as the Gold Coast, Streeterville, the Loop, Near East Side, River North, Fulton Market and West Loop rose 32% last year, while net rent at less expensive Class B properties downtown skyrocketed 34%.
In 2020, at the peak of the pandemic, downtown lost its glitter for many renters as restaurants, night clubs, bars and museums closed and rioting and looting erupted in the city. The downtown apartment occupancy rate slumped to 86.5% at the end of 2020 from 93.3% a year earlier, according to Integra.
However, the downtown market quickly rebounded in 2021 as many landlords offered sweet deals on rent and swank new units hit the market. Later, many tenants re-signed leases because they expected to return to their offices after working remotely from home during the pandemic. By the end of the year, the downtown occupancy rate rebounded to 94.7%, Integra reported.
Absorption, which reflects the change in the number of occupied downtown apartments, rose to a record 7,084 units in 2021, reported Integra. In 2020, total unit absorption was a dismal minus-238 units, the first year of negative absorption since 2005.
Integra is forecasting that downtown rents will rise at least 5% in 2022 because of strong demand and a slowdown of new-apartment construction that will limit supply. Developers are expected to complete only 1,263 new units this year, down from 2,693 in 2021.
Renters who can’t afford the best apartments downtown can afford some nice units in the first ring of neighborhoods outside downtown, noted Ron DeVries, senior managing director of Integra. In some cases, rents in outlying neighborhoods, such as West Town, are 20% lower than downtown, he said.
However, apartment hunters searching for those bargain rents in such North Side neighborhoods as Old Town, Lincoln Park, Lakeview, Edgewater and Andersonville may see that dream vanishing this spring.
Ma-and-Pa landlords are recalculating rents because of the property-tax increase time bomb that is ticking and set to explode with the second installment of the 2021 real estate tax bill this summer, analysts say.
Reassessment increases of 38% to 55% in Lincoln Park and Old Town are expected to send real estate tax bills soaring. Rent hikes likely will follow.