Midwest home to most competitive rental markets in U.S. for 2022

As the year ends, renting is at its highest level in half a century. The increased adoption of “work from home” provided many people the freedom to experience life in a new location.

What were the hottest rental markets in 2022? RentCafe.com analyzed the largest markets in the U.S. where data was available by honing in on (1) the number of days apartments were vacant, (2) what percentage of rentals were occupied, (3) the number of prospective renters competing for an apartment, (4) what percentage of renters renewed their leases and (5) the share of apartments completed this year.

Vacant units, nationwide, were occupied within a month, on average, and a heightened number of renters chose to renew their leases. Rapid inflation and surging interest rates forced many people to put their dreams of homeownership on the backburner, but with 95% of apartments already occupied, finding a new unit in any market was competitive, to say the least.

Renters in search of a lower cost of living flocked to the Midwest. Milwaukee, Wisconsin, and Grand Rapids, Michigan, were among the most competitive metros this year, based on the report, the latter boasting a city occupancy rate to nearly 97%. The shortage of supply there only increased demand, with 18 prospective renters in competition for each apartment. Milwaukee, too, had an average of 18 renters vying for a single unit, taking each off the market in less than a month.

Suburban Chicago ended the year as the country’s 18^th most competitive rental market, according to RentCafe. Nearly 70% of renters here decided to stay put and renew their leases, further driving competition—close to 17 renters applied for each available unit, a number well-above the national average. With occupancy rates touching 96%, the metro was far from meeting the aggressive demand for housing, despite the increase in newly delivered units.

Surprisingly, Chicago Urban didn’t make the cut on this list. Good or bad news, depending on who it’s being considered by. The rate of renewal leases here reached 56.5%, and an average of 11 renters competed for each vacant apartment.

 

Source: Midwest home to most competitive rental markets in U.S. for 2022

https://www.creconsult.net/market-trends/midwest-home-to-most-competitive-rental-markets-in-u-s-for-2022/

The Dangers of Selling Commercial Property Too Late

The last downturn

cost those who chose to sell commercial property an average of

30.3% of their property value

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Reason #1

Why people sell commercial property too late:

Complacency

 

Complacency is the most dangerous state to ignore.

It’s the moment before the market corrects and values decline. When the market goes through this initial correction, our natural tendency is to be complacent because initial corrections actually look like a cool-off period.

Then we expect the market to pick up again and continue with its growth phase.

But, the market continues to deteriorate and worries creep in as we wonder what is going on. Next, it is normal to say to yourself that your investments are good ones that they’ll ultimately come back.

When the market continues to soften until it seems there is no hope in coming back, that’s the absolute bottom of the market and the worst time to sell.

 

This point of capitulation is one of surrender and of asking how the government could let something like this happen.

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Reason #2

Why people sell commercial property too late:

Ownership and Identity

 

In order to avoid loss, people will overvalue what they own.

That is what Richard Taylor, Daniel Kahneman, and Jack L. Knetsch identified with the Endowment Effect. In fact, Kahneman and Knetsch won the Nobel Peace Prize for their research in this area of behavioral economics.

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It’s normal for people to overvalue what they own.

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In a study with Cornell undergrads, broken into groups and given identical coffee cups, Kahneman and Knetsch told one group to value the cups they owned and the other group to value the cups they would purchase.

They found the undergrads with the coffee cups were unwilling to sell their coffee cups for less than $5.25 while their less fortunate peers were unwilling to pay more than $2.25 to $2.75.

But, it was Carey Morewedge’s research into the Endowment Effect that revealed that it’s not loss aversion that leads to overvaluation, it’s ownership and identity.

Morewedge found that it’s our sense of possession that creates the feeling of an object being mine, which then becomes a part of our identity.

 

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Reason #3

Why people sell commercial property too late:

Loss Aversion

 

Why is it so difficult to sell commercial property in a market decline?

According to Brafman and Brafman, authors of Sway: The Irresistible Pull of Irrational Behavior people will go to great lengths to avoid perceived losses.

What’s more, people also succumb to their will to recover what once was.  They will spend whatever it takes not to lose, be it time, money, or emotional resources.

Imagine watching someone playing craps in Las Vegas. When they are on a roll, taking in their winnings, they race through the growth phase, reaching the peak of the game.

They feel ecstatic.

But what happens when the tide turns and they start to lose?

They enter the complacency stage, call it a short turn of bad luck, and keep playing.  They believe they will return to the top. But their bad luck continues.

By waiting to avoid losses, people hold off and then sell at the wrong time — maximizing their losses.

 

They lose their winnings, keep playing and generate losses. They would rather hold onto the idea of getting back to where they were at almost any cost than realizing their loss and moving on to another opportunity.

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Reason #4

Why people sell commercial property too late:

Self Reliance Time Traps

Time Trap #1: Self-Education

 

People will self educate online because it is free and immediately available. A review of the search term on Google for “commercial real estate trends” returned 152 million results. A search for “commercial real estate trends YouTube” turned up 310 million results!

No doubt, an abundance of free information in the form of market data, blogs, market reports, and online opinions on what’s happening in the market is available.

Time Trap #2: Friends, Family, and Non-Commercial Advisors

 

When we aren’t sure what to do, we often consult friends, family, and non-commercial real estate advisors for input. Unfortunately, these people will not want to be the ones to say sell because it is easier to say no and risk being wrong than to say yes and risk not being right.

Plus, most of these folks will not have the data that you have seen here. These people are more likely to share anecdote based advice like “My friend made a killing in real estate. You should hold on, it will come back.” Remember, people who made this mistake lost in 2008-2010.

Time Trap #3: Hire a Traditional Broker

 

It is easy to find a traditional broker, given that 1 in 164 people in the United States today have a real estate license. According to the National Association of Realtors, there are about 2 million active real estate licensees in the United States.

The problem is that most traditional brokers do not specialize in Commercial Real Estate, Investment Sales and further specialization by property type. 

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Have you thought of selling your property and would like to know what it's worth? Request a valuation for your property below:

Request Valuation

eXp Commercial Chicago Multifamily Brokerage focuses on listing and selling multifamily properties throughout the Chicago Area and Suburbs.

We don’t just market properties; we make a market for each property we represent. Each offering is thoroughly underwritten, aggressively priced, and accompanied by loan quotes to expedite the sales process. We leverage our broad national marketing platform syndicating to the top CRE Listing Sites for maximum exposure combined with an orchestrated competitive bidding process that yields higher sales prices for your property.

 

 

https://www.creconsult.net/market-trends/the-dangers-of-selling-commercial-property-too-late/

Inflation War Take Their Toll

 

After the strong economic rebound in 2021, growth in the U.S. has slowed in the face of rising inflation, the household income squeeze, and geopolitical events. In commercial real estate, third-quarter 2022 data showed slowdowns in the apartment and office sectors, while industrial and retail retained strength.

Multifamily

Multifamily absorption and rent growth decelerated in 2022, with absorption in the 60,000–70,000-unit range. That’s below pre-pandemic levels. In the meantime, rents rose year over year, but at a slower pace than a year ago. However, multifamily housing demand remains strong. Given rising mortgage rates and home prices, people may be forced to rent for longer due to decreasing affordability.

Office

As the country navigates hybrid work, the office sector continues to struggle. In Q3 2022, about 1.34 million more square feet of office space was vacant and placed on the market than was leased. Although more people returned to their offices, after four quarters with positive net absorption, demand for office space dropped. As a result, the market’s net demand for office spaces decreased relative to supply, and the national vacancy rate rose to 12.4% in Q3 2022 from 12.3% in the previous quarter. The office sector has the highest vacancy rate across all sectors.

Retail

Although spending slowed this fall, it remained strong in Q3 2022, driving growth in demand for retail spaces for the seventh straight quarter. Retail sales, excluding gas, auto, and non-store retailers, advanced to $383 billion in August, a 19% increase from August 2019. As a result, net absorption increased to 23.3 million square feet in Q3 2022, a 22% increase from the second quarter. Neighborhood retail that offers in-person services continues to advance even faster. Net absorption for neighborhood centers rose by 35 percentage points compared to the year’s second quarter.

Industrial

Demand for industrial property remains robust. Net absorption was nearly 425 million square feet in the 12 months ending in Q3 2022. Although demand may have tapered, the volume of industrial space absorbed continues to be double that of pre-pandemic times. As a result, this sector had the lowest vacancy rate in Q3 2022, at 4%.

With such strong demand, rent growth continues at historic highs, rising 12% year over year in Q3 2022. Rents are rising even faster for logistics space, at 13.5% year over year.

Source: Inflation War Take Their Toll

https://www.creconsult.net/market-trends/inflation-war-take-their-toll/

Economic Outlook Breakfast

Join us live at our 2023 Economic Outlook Breakfast for two dynamic speakers. Dr. Anthony Chan will join us again by popular demand, along with Dan Seals, CEO of Intersect Illinois. Both speakers bring data to life through a national and state-wide lens. Join Mainstreet for this powerhouse presentation that is sure to provide informational content to use throughout the year.
https://www.succeedwithmore.com/calendar/economicoutlook23/

FREE Comprehensive Intro to Commercial Real Estate Course

Join us via Zoom for our Comprehensive Intro to Commercial Real Estate event on Jan. 10! Professionals from every sector of the industry will share their knowledge as we explore the fundamentals of commercial real estate.

Date: Jan. 10, 2022

Start Time: 7 a.m. PT / 10 a.m. ET

Location: Zoom Webinar

The Comprehensive Intro to Commercial Real Estate course will focus on training new professionals with the basic skills and knowledge needed for a successful career in commercial real estate, including a detailed look at the different product types, services and technology you need to succeed, as well as industry trade groups you can tap into, and more.

We’ll also be covering renewable energy with experts from Qcells and IREM.

Add it to your calendar: Google Calendar Outlook Calendar Yahoo Calendar

 

Interested in Joining eXp Commercial?

CLICK FOR FURTHER INFO

 

 

 

 

https://www.creconsult.net/market-trends/free-comprehensive-intro-to-commercial-real-estate-course/

Off-Market Multifamily Sellers Are Leaving A Ton Of Money On The Table

Off-Market Multifamily Sellers Are Leaving A Ton Of Money On The Table

Marketing a property can increase the sale price by up to 23%, which runs counter to the idea that off-market deals can achieve higher values because a buyer will be more aggressive to seal a trade.

The perception is when a seller has one buyer vying for an asset, that buyer is more aggressive and willing to pay a premium because they don’t want the seller to get into a bidding war for the property. Our research found the opposite.

This is a sign it is in the best interests of owners to undergo a marketing campaign for their properties. Growing allocations from institutional investors toward real estate are still driving a sizable pool of investors into bidding for multifamily assets, and a full campaign is what drives the premiums.

The job of a broker to create a competitive environment on behalf of the seller. Putting a building on the market determines the strongest buyer.

That may not be necessarily based on price alone. If one buyer has a higher-priced offer but weak financial backing, versus a buyer with a stronger track record, taking a lower offer is the way to go. It’s our job to give the seller those options and we do that by marketing properties and generating the highest number of qualified offers possible.

There are numerous case studies where a seller received an off-market bid, put it on the market, and the off-market buyer still bought the asset but at a higher price.

 

Have you thought of selling your property and would like to know what it's worth? Request a valuation for your property below:

Request Valuation

https://www.creconsult.net/market-trends/off-market-multifamily-sellers-are-leaving-a-ton-of-money-on-the-table/

DMG Capital acquires multifamily portfolio in Orland Park

DMG Capital, the multifamily investment affiliate of Chicago-based Daniel Management Group (DMG) completed the acquisition of Alice Mae Court, a multifamily townhome portfolio in Orland Park, Illinois, for $5.36 million. Alice Mae Court will be marketed by DMG affiliate DMG Leasing and professionally managed by DMG.

“This acquisition allows us to strategically add rental townhomes to DMG Capital’s multifamily portfolio while at the same time maintaining our disciplined investment focus of pursuing properties that are well-located with strong revenue growth potential,” said DMG Capital President and Co-Founder Roger Daniel. “Alice Mae Court is an optimal opportunity as it is new, high-end construction that is well-located in highly desirable Orland Park directly across from Centennial Park and just steps from the 153rd Street Metra Station.”

Alice Mae Court consists of 16 townhomes with a mix of large three- and four-bedroom units that include high-end finishes throughout, in-unit laundry, private balconies and attached two-car heated garage parking spaces.

The Alice Mae Court townhomes directly address the post-COVID demand for flexible living spaces that allow residents to live and work at home and have greater access to the outdoors. It also exemplifies the increased focus from investors on suburban properties that meet resident needs in sought after locations.

 

Source: DMG Capital acquires multifamily portfolio in Orland Park

https://www.creconsult.net/market-trends/dmg-capital-acquires-multifamily-portfolio-in-orland-park/