Middle Market Digest-The Midwest

CHICAGO—Developers will soon add thousands of new apartment units to the city’s inventory, and that has some people wondering if this supply will outstrip demand. Steven Fifield of Fifield Cos. told GlobeSt.com this week that he was not deterred by worries about whether demand in the metro area matched up with supply. His firm will soon break ground on 727 W. Madison St., a 46-story tower in the rising Fulton Market area, and open it for leasing in early 2019. By that time, he strongly believes that tenants will have filled up the many units set for completion this year, and have absorbed many of the ones set for 2018. Furthermore, Fifield has a conservative and patient approach to leasing, and if it takes a little extra time, the company has already planned for that. But most importantly, he believes the market, at least when it comes to luxury units in hot neighborhoods like Fulton Market, may have more strength than some think. It’s true the market has been absorbing about 3,500 units a year, and with about 9,000 getting delivered in the next two, it will be a challenge to absorb it all quickly. But Fifield has developed thousands of units since the downturn, many in the West Loop, and has noticed some changes. Ten years ago, for example, only about 2% of their renters were empty nesters, he says. But today, this much-prized, high-income group signs about 15% of Fifield’s new leases. This trend does not seem to be slowing down, and it’s possible this group will soon constitute 20% to 25% of those settling in luxury towers like 727 W. Madison. If so, that would mean current estimates of the market’s ability to absorb new luxury units are perhaps conservative. In any case, the number of people living within two miles of downtown has increased from about 42,000 15 years ago to around 150,000. And Fifield believes that increase has created an unstoppable momentum that will last for years. More companies like Google, now located a few blocks from where Fifield’s new tower will rise, will want to locate in such a vibrant, modern neighborhood. And that, in turn, will continue to fuel demand for top-of-the-line, class A luxury units, even if demand falls off in less desirable areas.

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