Glamorous downtown Chicago is bustling with the impressive influx of top corporations moving into downtown. However, apartment buildings are beginning to feel the effects of over-saturation and landlords are having a tough time renting their downtown spaces. With more buildings coming online in 2017, the increase in supply should cause rents to deflate as vacancy rates rise.
The Dance of Supply and Demand
There is an inverse correlation between rent prices and vacancy rates — as vacancy rates increase, rents decrease. This relationship remains consistent as a higher supply means more options for potential renters. When the market is saturated with choices, then landlords cannot leverage a limited supply for higher rents. The simple economics of supply and demand will continuously cause a rise and fall of rent as new apartment buildings are brought online.
New Apartment Buildings in 2017
Rent in Logan Square is jumping up to nearly $2.50 per square foot. Unfortunately for renters, that is low compared to some downtown apartments that reach $3.03 per square foot. Thankfully, capitalism is working for the renter, and developers will complete roughly 12,600 apartments spanning across 2016 and through 2018, according to Crain’s Chicago. The new rush of available spaces coming online will pump the brakes on the rapidly inflating rent prices. The grip landlords currently have over rent prices may soon loosen in order to fill units when the inevitable flood of open spaces hits the market in the near future.
Enter the Tenant-Friendly Era
As time marches forward, so do rent prices. For nearly seven years straight tenants have experienced rent hikes. New corporations moving to Chicago means many of their employees will relocate closer to their jobs, further increasing competition for open spots. However, the timing works out well with the large amount of apartments opening up over the next few years, which means rent prices are unlikely to see a significant rise for a while.
Chicago’s real estate market is moving along at a healthy rate. While prices are inflating faster than renters would like, new apartment buildings are coming to the rescue and will relieve the rapidly rising rent. With the market potentially flipping to a tenant-friendly one, the upcoming years will be an excellent time to seek a place to live in historic downtown Chicago.
Regardless of whether rent continues to rise, owning for long term is always a better financial option. If you or someone you know are looking to sell or purchase a residence we encourage you to speak with Lisa Kalous.
The red hot downtown Chicago commercial real estate market remains a popular destination in 2017 with more top corporations seeking spaces in the city. With a shift in how companies structure themselves internally, the growth of importance on office culture is a driving force behind the downtown exodus. The momentous surge of incoming corporations will continue to roll into the new year.
Evidence of a Hot 2017 Market
The momentum of the downtown craze is rolling into 2017 as Cars.com expands their headquarters in downtown Chicago. They plan to move to the city in mid-July, eating up 140,000 square feet of space. Wilson Sporting Goods will also join the club as a new corporation soaking up additional square footage. With these two corporations already publicly planning to move to Chicago, the writing on the wall says the hot market will stay warm in 2017 — perhaps they’ll even hold down the already low vacancy rates.
New Age Company Culture
Companies such as Google, Zappos and Apple have experienced much fame around their culture of encouraging and nurturing ideas within their company. They promote the entrepreneurial spirit allowing the free expression and pursuit of ideas. They also understand that happy employees work harder. This shift in company culture has changed the way businesses operate, adding a focus onto the care about the lifestyles of their employees. Moving downtown – closer to where their employees want to live – allows corporations to provide a greater range of amenities and a better quality of life for their work force.
Attractive New Properties
Chicago is a bustling commercial real estate market, and there are a slew of attractive new properties coming to market in 2017 and beyond. The repurposing of Coyne college campus will convert it into a trendy office space granting the city an additional 76,000 square feet and another 400,000 feet of space after their plans for a new nine-story building when completed. The new properties will add significant square footage to the Chicago market and help balance out rent and vacancy rates.
With new companies joining the already impressive list of corporations that are moving into downtown Chicago, the commercial real estate market does not have a plan to cool down anytime soon. Add the exciting new properties planned for the upcoming years and the focus on company culture, and the market in Chicago is poised to be an attractive destination for a while.
Chicago’s commercial real estate market favors sellers, presenting high demand and low supply in the downtown area. This means the window to moving into your dream office may be closing faster than you think. If you find that perfect property for your business, be prepared to act fast and close the deal with the property owner before someone else does.
Be Prepared to Negotiate
The near-record low vacancy rates have made spaces in Chicago harder to come by and more valuable. Lack of available offices combined with increased demand means property landlords are receiving multiple offers more often. This is where a skilled negotiator comes in to make sure your offer is competitive yet beneficial to you and your business. Don’t back down from the challenge!
Jump on an Open Space
As with anything, being prepared will speed up the process. Make sure you have any documents filled out and ready to go at a moment’s notice. Persistence is another essential element to jumping on a space you want. Keep in constant contact with the landlord, and any other involved parties, to make sure the process does not get unexpectedly halted in any area. There are a lot of moving parts to a transaction, and the best way to make sure the process goes as smoothly as possible is to have a professional on hand.
Work With a Professional
Moving your office is an important decision and a complex process. Hiring an outside commercial broker who can easily navigate the ins and outs of the industry is a great way to ensure you find the best space for the best price. Professional brokers have access to a wide range of connections to help smooth the process of moving. They also have the expertise to negotiate and close a deal faster than you would be able to on your own. This is especially critical in today’s fast-paced real estate market. A seasoned professional will help you avoid falling into any commercial real estate pitfalls that arise from rushing into a lease.
In a low vacancy market, spaces are highly contested. Speed and efficiency are the keys to landing the office of your dreams. Knowing how to negotiate contracts, expedite the process and having the right connections can all help guarantee a smooth closing. Hiring a professional commercial broker can keep you from missing out on a great opportunity.