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Market Snapshot: New-Construction Condos in Downtown Chicago

  • August 26, 2011

by Don DeBat

The condominium-construction boom in downtown Chicago is officially dead, reports Appraisal Research Counselors Ltd.

According to Appraisal Research’s 2nd quarter “Downtown Chicago Residential Benchmark Report,” the condo boom officially ended in 2010. And, 2011 is the first year in the past 15 where no new for-sale units are being added to the downtown market.

“More than 40,000 condo units were constructed downtown since 1996, with a peak of 4,800 residences completed in 2007 alone,” said Gail L. Lissner, vice president of Appraisal Research.

However, if you are shopping for a brand new condo that was built in 2010 or earlier, there currently are 1,911 developer-owned units available, and most are ready for immediate occupancy, Lissner noted. Choices include 1,407 new-construction residences, 329 condo conversion units, 152 adaptive-reuse lofts, and 23 townhome residences.

Appraisal Research reported that the hottest developments with the most closed units downtown during the 2nd quarter of 2011 were: 757 Orleans (21 units), 770 Lofts (15 units), 235 Van Buren (14 units) Silver Tower (14 units), 200 N. Dearborn (14 units), Aqua (12 units), Legacy at Millennium Park (12 units), Park Monroe (11 units) and Trump International Tower (10 units).

A total of 196 new-construction condo units were purchased and closed downtown in the 2nd quarter of 2011, reports Appraisal Research. Sales velocity has dropped off dramatically during the Great Recession. Some 665 units were closed in the 2nd quarter of 2010.

At the current sales pace there may be enough inventory to last nearly 2.5 years, experts estimated.

“While we don’t expect to see residential for-sale development anytime soon, there are several prime downtown sites that are currently being marketed,” Lissner said. “These sites had formerly been planned for large condominium developments or mixed-use developments.”

Lissner said if these sites sell, it is likely that they will either be “mothballed for future development” or used for some non-condo development, such as apartments or other commercial or institutional use.

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Silver Tower, courtesy YoChicago

“We are seeing a tremendous appetite for rental development and a growing pipeline of proposed rental developments,” she said.

Appraisal Research noted that 809 new-construction apartment units were rented downtown in the 2nd quarter. There currently are 1,987 more occupied rental units downtown in the second quarter of 2011, compared with the same quarter in 2010. “We expect 2,324 new apartments to be leased by fall of 2011,” Lissner said.

With all the demand for rental apartments downtown, rents are on the rise. Rents in Class A buildings downtown are up to $2.43 a square foot, or a whopping 9.46 percent from a year ago. Luxury rents are at average of $2.68 a square foot, up 12.61 percent over a year ago.

“Additional rent increases are expected throughout the remainder of the summer with spikes occurring in early 2012,” Lissner predicted.

Before new condo development activity begins again, unit pricing, market demand and the employment figures to the city will first need to strengthen, Lissner said.

“Meanwhile, the unsold inventory in the condo market will ultimately get absorbed (sold) as the economy improves,” she said. “This lull in activity will set the stage for a new development cycle to begin again within the next several years.”


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Don DeBat’s weekly real estate column is syndicated by DeBat Media Services. For more home-buying information visit his website at: www.dondebat.net.

See other articles related to: chicago condo market

This article originally published at http://chicago.urbanturf.com/articles/article/market_snapshot_new-construction_condos_in_downtown_chicago/4054

Lauren Mitrick

Newman Realty

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