River North Apartments Holding Their Own

CHICAGO—Developers, investors and lenders have been worried that years of exuberant construction would eventually create a downtown apartment glut. And River North, the most established residential neighborhood in the downtown market, was considered especially vulnerable due to the many deliveries in new areas like South Loop and West Loop. But according to a new study by KIG CRE, which tracks more than 100 buildings in Chicago, the data show a different story.

“Just about every building in River North exceeding our expectations,” Laura Ballou, senior associate—market analytics for KIG, tells GlobeSt.com.

“We hear in the press about all of the companies moving downtown, and we’re seeing its effect on the market for apartments,” she adds. “Nobody seems to be having a problem renting their downtown units.” And a large percentage of the new renters hail from outside the city and state.

KIG currently tracks 111 mostly-institutionally owned buildings in both the Loop and the surrounding neighborhoods. The properties have a combined total of more than 40,000 units, including 6,499 units in River North.

In 2017, River North accounted for 33% of all new units added to Chicago’s downtown, Ballou says. However, the submarket was responsible for 40% of the total absorption. And of the 1,527 River North units delivered by developers in 2017, tenants had occupied 76% of by May 31. Furthermore, 95% of the units delivered in the first half of 2017 were occupied.

Occupancy of some stabilized buildings in other core neighborhoods has dipped, she adds, but not in River North. “The older buildings are just strong and steady.” Stabilized buildings there averaged 94.6% occupancy in May, the highest of any submarket save the burgeoning West Loop. In May of 2017, those same River North averaged 92.3% occupancy.

Landlords have secured these leases without resorting to overly-generous concessions. The average rent concession offered in River North now stands at just 6.33%, considerably less than the 8.33% hit landlords take if they offer one month free, and stabilized buildings offer just 2.17%. “I was surprised how many River North buildings are not offering any concessions whatsoever,” Ballou says, a category that includes just over half of its stabilized buildings.

The data show new buildings in the South Loop, West Loop and River West are offering greater concessions despite delivering only 19%, 9% and 7% of new units since 2017, respectively.

And lease-up assets in River North command some of the highest effective rents in the city, averaging $3.39 per square foot. Stabilized assets in River North, averaging $3.15per square foot, reign supreme over other submarkets.

As of June 1st, River North developers had only another 290 units left to deliver in 2018. Reaching this peak will make securing leases even easier in the coming year. And even though the 60-story Wolf Point East and the massive One Chicago Square will soon bring another 1,567 units to River North, Ballou remains confidant that sufficient demand exists.

“River North has got the live-work-play lifestyle nailed down at this point,” she says. Not only is it closer to the many jobs in the Loop, it has a far greater variety of shops, parks and amenities than the newer neighborhoods to the west and south. “It grew into what it is a bit more organically.”