CHICAGO- Marcus & Millichap has just released a series of second quarter forecasts on local conditions in apartment housing markets around the country, and the firm says the Chicago metropolitan area should see its vacancy rate fall this year after rising 20 basis points in 2012. “Job growth will fuel new household formations and support a 40-basis point dip in vacancy this year to 4.3 percent, with the rate in the suburbs on track to fall to 4.0 percent,” the report states. However, the metro area's unemployment rate, which was at nearly 9 percent during the first quarter, will remain too high and stop the market from truly catching fire. Marcus & Millichap also recently released its National Apartment Index, which compares and ranks the country's top 44 markets, and found that Chicago's “job growth forecasts falls short of every other NAI market.”

Still, employers will create 66,900 jobs in the area in 2013, they forecast, boosting employment by 1.5 percent and an improvement over last year's gain of 60,600 jobs. “With the increase, the metro economy will have recovered two-thirds of the positions lost during the recession.”

Properties in the metro area will continue to change hands, the firm says, primarily due to continued low interest rates on acquisition financing. But construction of new units should also expand. "Approximately 5,450 apartments will come online in 2013, more than twice the number of units delivered last year,” M&M says. “Completions in the city will expand rental stock there 1.6 percent; key completions include the Coast and K2 luxury towers.” Furthermore, because they will serve different populations, the availability of these new luxury units will probably have little effect on the older properties that might interest investors.

Rents will also rise as the regional economy heals. “Led by gains in the city, average effective rents in the metro will increase 3.2 percent this year to $1,202 per month, modestly outpacing the 3.0 percent jump registered in 2012.”