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CHICAGO—The multifamily apartment market looks incredibly robust in many US markets if you just examine the top-of the-line numbers. Developers have recently built thousands and thousands of new apartment units, and leasing activity for most of these developments has been healthy.

However, construction costs have increased quite a bit in the last few years, partly due to the escalating costs of land and labor. And high costs have helped ensure that most new construction takes place in or near downtown core areas, leaving vast stretches of the suburbs untouched.

“These downtown luxury properties have to have very high rental rates, but that also means they have become unaffordable to millions of renters,” Michael Zaransky, managing principal, MZ Capital Partners, tells GlobeSt.com. With a few exceptions, suburban areas generally can't support sky-high rental rates, making new construction difficult to justify. In the Chicago area, for example, “if you leave out Evanston and the North Shore, there's nothing.”

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Brian J. Rogal

Brian J. Rogal is a Chicago-based freelance writer with years of experience as an investigative reporter and editor, most notably at The Chicago Reporter, where he concentrated on housing issues. He also has written extensively on alternative energy and the payments card industry for national trade publications.

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