Chicago's Expanding Tech, Financial Jobs Driving Multifamily Sector
According to a new Yardi Matrix report indicates that Chicago is living up to its financial hub status and continues to add high-earning jobs, driving multifamily rent growth. The pace of development shows no signs of slowing down, as the metro had 17,000 multifamily units under construction as of February 2018, more than half of which are expected to come online this year. Yardi Matrix estimates that Chicago rents will rise by 2.8% in 2018.
Expansions and workplace redesigns have prompted several large companies to relocate or expand office spaces. Facebook, for example, is adding about 100,000 square feet to its office on Wacker Drive, enough to house 500 new employees. Walgreens Boots Alliance added 27,000 square feet at Sullivan Center and announced it will double its number of local employees by adding 300 tech positions.
"With Chicago's tech environment expanding, office-using sectors are bound to continue adding jobs, attracting young talent and maintaining a healthy demand for rental units," says Paul Fiorilla, associate director of research for Yardi Matrix. This will fuel demand for high-end apartments and push up the absorption of new units. However, Fiorilla adds, "With a net absorption of just 4,000 apartments for the 12 months ending in February 2018, oversupply could temper the metro's rent growth."
The news isn't all good. Chicago is suffering significant cuts in manufacturing and retail, and the city's high sales tax is deepening the impact of e-commerce on traditional retailers, some of which are closing up shop. Carson's and Bergner's, for example, announced they will lay off about 400 employees this year.
The new tariffs on steel imports could further increase building costs for high-rises in Chicago as well as other major metros; this development might, in turn, lead to higher rents.
The Yardi Matrix report also found that ownership in Chicago remains less costly than renting, an ongoing trend since the last downturn. The average mortgage payment accounted for 16% of the median income in 2017, while the average rent of $1,431 equated to as much as 25%. The median home price in the metro decreased slightly in 2017, to $232,149, the lowest value of the last three years.