Peak Realty | Midyear Market Report 2023

MIDYEAR Market Report

FIRST HALF OF 2023

at a GLANCE

The end of Q2 2023 marks the mid-point of the year as well as the rental season. The season began with well above average renewal percentages which was caused by many factors including high interest rates. It has lead to continued strong market rent growth as a result of “lack of supply.” This scarcity of available rental units can be compounded by a deceleration in construction activities following the post-COVID slowdown.

THE VIEW FROM THE TOP

Monitoring multifamily trends from Above. Keeping focus on the big picture to deliver strategic clarity without getting lost in the details.

The lead percentages by month echo almost exactly how 2022 performed within a narrow margin of difference. Lead intensity (lead/unit on the market) behaved similarly as well. Our team anticipates continued maximum seasonal velocity for through August. We will monitor data trends closely from there on, as we saw an earlier than anticipated slow down in 2022.

LEASE UP Trends

THE AVERAGE PRE-LEASE IS 35% FOR THE FIRST HALF OF 2023.

We’re experiencing a more competitive market than ever before which means we are even more focused on our conversion ratios. The proven Peak system, with leasing agents on-call around the clock, allows us to maintain the competitive edge. Prospective renters expect responses within minutes versus hours and want to tour when most convenient to them. In the past month, we’ve tracked the time from Lead Generation to Tour. The average time between is less than 3 days with many leads touring the same day as their initial request.

PORTRAIT UPTOWN

Concessions

PROGRAMS

Concessions have played a big part in lease ups, a trend that doesn’t seem to be going away. From “look and lease” specials (waiving move in fees if prospect applies within 48 hours), to offering one month free, concessions help attract prospects from other options in the submarket leading to increased leasing velocity.

LOOK & LEASE AT SAGE WEST LOOP

Programing

1 BEDROOM

+ OFFICE

Couples are opting for the newly designed “1 Bedroom plus office” option to be more budget-conscious. These units, although newer to the market, have become strong contenders

against higher-priced 2-bedroom apartments. Nevertheless, the 2-bedroom market remains robust amidst the competition.

Following the COVID-19 pandemic, there was a heightened demand for more spacious homes. Studio and convertible floor plans experienced a sharp decline in demand. However, this season has witnessed a remarkable resurgence in the appeal of these unit types. They are now the fastest leasing units, and in response to the renewed interest, developers have been creating increasingly well-designed layouts to maximize their potential.

Total Units by Bedroom*

RESURGENCE OF STUDIOS & CONVERTIBLES

NEIGHBORHOOD

Trends

WEST LOOP

The continuous development in Fulton Market has shown remarkable strength, with no signs of slowing down. This momentum has facilitated the expansion of the West Loop into the southern and western areas. Peak has been successfully working on the lease-up of Sage West Loop since April, and the project’s performance has been outstanding. With over 50% of the units already leased, the project is well on track to reach full occupancy this season. The rents deviate less than 15% from lease-up projects in the heart of Fulton Market.

THE LOOP

Exciting news of Google’s move to the Thompson Center and the plans for Lasalle Street Reimagined have revitalized interest in The Loop. Peak took over the Millennium on Lasalle project (29 S Lasalle) in the middle of the year, and within less than four months, we have boosted occupancy from 60% to over 90%. There is evident demand from renters; the key lies in offering the right product and approach to capitalize on the opportunity. The product and approach have to be just right.

THE DRIVING FACTORS

Chicago’s allure to renters stems from a diverse job market, vibrant culture, and iconic architecture. Peak Realty tracks renter origins to help shape forecasts for future planning. With excellent amenities and a thriving city lifestyle, Chicago remains a top choice for career-driven individuals seeking a dynamic urban experience.

22%

78% Of the in-state Renters...

92%

8%

Moved from the Suburbs into the CIty

CITY OF GROWTH

Chicago’s multifamily real estate market stands out amidst a challenging national landscape. Unlike areas experiencing declining absorption and rental growth due to elevated construction, Chicago’s demand remains stable and positive. With over 7,000 units occupied additionally in the past year, exceeding the region’s average net absorption, and a remarkable vacancy rate of 5.3% despite recent developments, the city’s multifamily market maintains a strong footing.

5.3%

KEY TAKEAWAYS

This Midyear Market Report for Chicago Multifamily Leasing reveals a robust and resilient market that continues to thrive amidst evolving dynamics. The city’s multifamily sector has showcased impressive resilience, demonstrating its appeal to residents and potential great opportunity for investors. With increasing demand, strong rent growth, and a slowing supply pipeline, the outlook for the remainder of the year remains optimistic.

Focusing on the data and the trends is the key to success. There are concerns surrounding a preliminary slow down as we experienced in 2022. We’ve not yet experienced any of those indicators at this point. Which will allow to capture as much of the season provides. We are intensely focused on tracking the market real time.

As always, you’ll hear more from us especially if we currently have a project. In the meantime, let’s grab coffee to discuss your portfolio and how to best position it for the months ahead!

LEASE UP PROJECTS