(To read more on the multifamily market, click here.)
CHICAGO-Multifamily sales volume in the Downtown area is expected to exceed $1.3 billion, shattering last year's $510 million record, Appraisal Research Counselors is predicting. Meanwhile, prices per unit across the wider city and suburban market have inched up to another high, according to Marcus & Millichap Real Estate Investment Brokerage Co.
Appraisal Research Counselors' "Residential Benchmark Report" has tracked $380 million in sales so far this year, but notes another $880 million in potential deals are either pending or on the market. Between 1998 and 2004, an average year has seen about $350 million in sales.
Fueled by condominium converters who are paying hefty prices for buildings in sought-after areas, the median price per unit rose 3% to $71,000, according to Marcus & Millichap's Apartment Research Report. However, buildings bought by would-be converters this year have sold $203,800 per unit, the firm notes.
"Potential conversion value, rather than rental fundamentals, are driving prices higher and pushing down cap rates," according to Marcus & Millichap's report. One example is found in the Lincoln Park neighborhood, where occupancy and rental rates have remained flat. "The 195-unit 2000 Lincoln Park West sold for $45 million, or $231,000 per unit," Marcus & Millichap's report notes. "With condos in Lincoln Park typically surpassing the $300,000 mark, the profitability of offering units for sale instead of operating them as rentals becomes evident."
Among the high-end deals this year is the 480-unit Park Millennium, which at $130 million, represents a $270,750 per unit price. More to the norm is the sale of the 798-unit Barrington Lakes complex in northwest suburban Hoffman Estates, at $65 million, or $81,500 per unit.
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