2017 Chicago Apartment Investment Market Update

2017 Chicago Multifamily Review

As a real estate advisor offering investment, property management, construction and sales services we provide regular market updates to our clients.   Root Realty specializes in walk up multifamily and mixed use property and works with local, out of state, and international clients who value a real estate partner that provides advice based on experience and analytics.   In this report when we mention high quality assets we are referring to high rises in the central business district and new construction.  When we refer to vintage assets we mean walk ups, low rises, and mid-rises in the neighborhoods.  75% of the units in Chicago are in the vintage assets which is where Root Realty focuses.

Summary of 2017 Highlights

  • In 2017 Chicago developers delivered a high volume of new units, but the supply was absorbed without a decrease in rent or occupancy
  • Average rents increased, but there was a slowdown in growth
  • Demand for walk-ups intensified as investors sought value-add opportunities
  • Average price per unit decreased, but only because of a shift in volume to value-add properties

During 2017 44 new buildings and over 4,800 new units were added to the market.  There are currently over 10,000 units under construction.

The average asking rent per unit was $1,500.  Asking rent increased 1% in 2017 which represents less momentum than the 4.6% increase we saw in 2016 and the smallest increase since 2009.   The rent growth over the last 2 quarters of the years was the slowest since 2011.

Occupancy held steady at 92.7% across the city, a slight decrease from 92.8% in 2016

Chicago Apartment Occupancy vs Rent
2015 to 2017 Chicago Apartment Occupancy vs Rent


Volume in vintage assets expanded as investors sought value-add opportunities.

Sales volume in 2017 was $2.0 billion a decrease from the $2.5 billion we saw in 2016.   The decline in volume was from transactions in higher quality assets, which decreased from $1.7 billion to just over $1 billion.  The difference was made up in transactions of vintage assets, which we believe are value-add investors, where volume increase by almost 25% to over $1 billion.

Cap Rates for higher quality apartment buildings dropped to around 5% in 2015 before ticking up in 2016 and reaching above 5.7% in 2017.   In vintage assets we saw cap rates bottom just below 8% in 2016 and tick up towards 8.5% in 2017.

Chicago Apartment Cap Rates
2014 to 2017 Cap Rates for Chicago Multifamily


Average price per unit decreased, but only because of a shift in volume to value-add properties

The average sale price per unit in 2017 was approximately $185,000.   This is a decrease from $209,000 in 2016; however this is not indicative of a price decrease in the market as it can be explained by the rotation from high quality assets to vintage assets.

The average sale price per unit higher tier assets was over $429,000 which was up from $417,000.

The average sale price per unit for vintage assets was over $117,000 which was up from $104,000.


In our office we are studying this data to determine which areas had the most growth and figure out how our clients can benefit.  We welcome a discussion on this update and would be happy to share our analysis of how investors can use this information, so do not hesitate to contact us.


Sources: CoStar Realty Information, Inc.