Why rent prices dropped for the third straight month

A new rent report reveals that the rental market has seemingly flipped: After prices surged throughout 2021 and most of 2022, they've declined almost as quickly for five of the last six months.

U.S. rent prices decreased by 0.25% from January to February 2023, according to the latest data from rental listings site Rent.com. While it's a smaller decrease than in previous months, it brings the U.S. monthly average rent price down to $1,937 — lower than its August 2022 peak of $2,053.

As of February, 12 of the 50 most populous U.S. cities have declining year-over-year rent prices, according to Rent.com data:

1. Oklahoma City: -15.71%
2. Austin, Texas: -6.51%
3. New Orleans: -6.36%
4. Phoenix: -4%
5. Minneapolis-St. Paul: -3.5%
6. Dallas-Fort Worth: -2.56%
7. Baltimore: -2.21%
8. Houston: -1.91%
9. Birmingham, Alabama: -0.55%
10. Chicago: -0.52%
11. Denver: -0.34%
12. Virginia Beach, Virginia: -0.17%

Oklahoma City had the most dramatic decline, with year-over-year rent prices dropping by 15.71% in February. Prices there fell 8% between January and February of this year.

Even with the recent price dip, year-over-year U.S. rent prices are still up 1.7% as of February. However, that's a remarkable climb down, considering that year-over-year rent growth was double digits for most of 2022.

Raleigh, North Carolina, has seen the most growth, with a year-over-year rent price increase of 19% as of February, according to Rent.com.

Why are rent prices falling

The most significant factor in recent rent price declines is a glut of new rental units in 2023, "the largest in 50 years," says Thomas LaSalvia, director of economic research at Moody's Analytics. Rental unit vacancies have increased slightly as well, he says.

Demand for apartments has also cooled off, which has eased prices. He says this is due to an "affordability crunch" caused by high rent prices and an uptick in unemployment.

"This is very much a supply and demand story where demand is easing a little bit, and supply growth is picking up," says LaSalvia.

He says that with so much economic uncertainty, people probably think twice about moving, especially those looking to move out on their own.

"A newly graduated college student would be less likely to enter into an apartment market, or at least go with a studio or one-bedroom themselves," says LaSalvia. "In some of the higher cost areas, they might consider finding roommates to lower costs."

Even with fewer renters seeking out new homes, demand is still strong enough for a slight overall increase in U.S. rent prices yearly. Moody Analytics expects rent price growth of 2.5% to 3% for 2023.

Barring a recession or unforeseen events, rent prices are expected to grow annually by 3% to 4% in 2024 and 2025, says LaSalvia. That's roughly the same rate that prices rose in the years leading to the pandemic.

 

 

Source: Why rent prices dropped for the third straight month

https://www.creconsult.net/market-trends/why-rent-prices-dropped-for-the-third-straight-month/

Mason Square

Fully Equipped Car Wash For Sale
1250 Douglas Rd. | Oswego, IL | 3,750 SF | 6 Bays | 1.19 Acres
Mason Square Car Wash, a fully equipped and operational 6-bay carwash in southwest suburban Chicago’s Oswego, IL. Ideally located on an out-lot of the Mason Square Shopping Center along heavily trafficked Route 34, averaging 45,000 vehicles per day,
Listing Agent: Randolph Taylor 630.474.6441 | rtaylor@creconsult.net
https://www.creconsult.net/fully-equipped-car-wash-oswego-il-route-34/

Mixed-Use Conversions May Be The Future Of Chicago's Suburban Office

As the Chicago suburbs face record-high office vacancies, the future of suburban office is likely to hinge on the conversion of outdated buildings into modernized mixed-use spaces, CRE experts said during Bisnow’s Future of the Chicago Suburbs event on March 21.

 

Powering Chicago's Elbert Walter III, Edwards Realty Co.'s Ramzi Hassan, EQT Exeter's Tammy Kelly, Tucker Development's Aaron Tucker, Opus Development Co.'s Paul Robertson and NAI Hiffman's Stephen Chrastka.

With suburban office vacancies averaging around 26% in Q4 — and as high as 33.2% in the northwest suburbs, according to NAI Hiffman — owners are facing the reality that many companies aren't returning to offices in sufficient numbers, leading them to consider different uses.

“A lot of communities haven't really embraced the need to reposition their offices to something else, so they're hanging on for that mythical office tenant that may be coming at some point in the future,” Opus Development Senior Director of Development Paul Robertson said. “It's probably going to take them a couple of years to figure out that that's not going to happen. We need to do something else with it.”

A new type of office space conversion is the “metroburb,” a term used to describe Bell Works Chicagoland, which hosted the event, as a metropolitan destination in the suburbs that incorporates offices, residential, retail and dining into one community. Inspired by Somerset Development converted the 150-acre corporate campus for AT&T in Hoffman Estates into the self-contained Bell Works Chicagoland.

“We started developing the metroburb pre-pandemic because we saw a trend,” Inspired by Somerset Development President Ralph Zucker said. “The pandemic accelerated the trend, and that trend is that people don't want to drive an hour into the city, give up two to two and a half hours of their life. It's about the level of retail. It's about the great bar. As those things are coming to the suburbs, there's less reason to schlep to the city.”

Suburban office parks that are struggling with vacancies might need to rethink how their spaces are used and consider converting them into public-facing spaces like restaurants or bars, Zucker said.

“The challenging ones are the ones that are within an office park where there is only other similar uses, and I think they're going to have the hardest time,” Wright Heerema principal Roger Heerema said. “I think ones that are maybe located on a fringe, I think maybe communities will be more open to the rezoning that's necessary to make them viable, but I think it's a tough question.”

Office-to-residential conversions are another option developers are considering.

“We're looking at office buildings to convert from office to multifamily,” Robertson said. “The challenge: The floor plates don't lay out very well, but there's just too much commodity office out there, and I think you will see some of that either get demolished or repurposed into other uses.”

Wright Heerema Architects' Roger Heerema, Heritage-Crystal Clean's David Chameli, Inspired by Somerset Development's Ralph Zucker and 25N Coworking's Mara Hauser.

Indeed, some older office buildings that aren’t well-suited for conversion might just need to come down as companies reduce their leased square footage in office buildings, Heerema said.

“As we're looking at a shrinking office need, I think most companies that are re-signing leases are signing for a smaller amount of square footage than what they're occupying currently, so I think some of these buildings are going to just not be viable as office buildings,” Heerema said.

However, suburban office spaces are often sitting on valuable pieces of land, so Zucker encourages companies to consider redevelopment before tearing down.

“Don't wait for the bank to take it back,” Zucker said. “Create value in your community by rezoning it on your own.”

Despite challenges with office occupancy, suburban offices tend to offer more space for employees to spread out, which is particularly helpful as social distancing concerns persist.

“I think when you look at downtown offices, they tend to be, in some cases, more density than offices in the suburbs, where people are sitting sort of on top of each other more, but then also having to get to the office via public transportation,” Heerema said.

The offices that thrive in the future will create social environments that compel people to leave their home offices, and the key to doing that is creating environments focused on “comfort, convenience, variety and community,” Heerema said.

“I think the office market is discovering that the ultimate amenity, it's not the gym,” Zucker said. “It's not the cafe. It's life. It's people. We're social animals.”

Source: Mixed-Use Conversions May Be The Future Of Chicago’s Suburban Office

https://www.creconsult.net/market-trends/mixed-use-conversions-may-be-the-future-of-chicagos-suburban-office/

1120 E Ogden

Retail / Office Space For Lease | 3,674 SF | $20/SF NNN
1120 E Ogden Ave, Suite 101 | Naperville, IL 60563
Broker: Randolph Taylor rtaylor@creconsult.net | 630.474.6441

https://www.creconsult.net/retail-office-for-lease-1120-e-ogden-ave-suite-101-naperville-il-60563/?wpo_all_pages_cache_purged=1

163 E Lincolnway

Just Listed - 23 Unit Multifamily For Sale
$425,000 | Heavy Value-Add | 20.5% Cap Rate (Proforma)
631 E Lincolnway | Morrison, IL 61270
https://www.creconsult.net/for-sale-heavy-value-add-23-unit-multifamily-property-morrison-il/

Chicago Home Price Growth Outpaces Nation for First Time Since 2016

The Windy City’s housing market is showing resilience, as its home-price growth has topped the national average for the first time in years.

After having one of the lowest growth rates among major cities from 2018 to mid-2022, Chicago now boasts figures considerably higher than the national average, Crain’s reported, citing the S&P CoreLogic Case-Shiller Indices.

Values for single-family dwellings sold in the area were up nearly 5 percent in January from the previous year, compared to the nationwide average of 3.8 percent. The city’s overall price growth rate of 5.9 percent also squeaked past the national figure of 5.8 percent.

It’s possible Chicago’s statistics are skewed due to California’s residential market plummeting and pulling down the averages. Yet, the recent study is also a sign that the city successfully evaded a bubble crisis, whereas other major metros around the country, like Austin, neared a complete housing crash.

The last time Chicago home price growth outperformed the national average was before 2016. And last year’s gain comes on top of the city achieving a 12.5 percent spike in home value from January 2021 to 2022.

However, the steady climb peaked in June of last year, when interest rates and inflation shot up. Chicago’s housing market also mirrors the nationwide trend of reverting back to more of a pre-pandemic status.

Plus, the pandemic-fueled housing boom caused a much smaller spike in Chicago than in other metropolitan areas, with Windy City prices rising 24 percent from 2019 through 2022 whereas 16 out of the nation’s 20 largest metros had prices shoot up 30 percent or more over the same period, according to Attom.

As Chicago properties put up a stronger resistance to prices sliding back down after interest rates started rising last year, brokers have touted the city’s stability, noting prices here may not appreciate as quickly during booms but that the market offers more safety during downturns.

While prices in the area remain stable, especially relative to other cities, home sales are on the decline. A January report showed that transactions fell by 15 percent last year, and the number of new listings dropped 35 percent year-over-year in December.

Source: Chicago Home Price Growth Outpaces Nation for First Time Since 2016

https://www.creconsult.net/market-trends/chicago-home-price-growth-outpaces-nation-for-first-time-since-2016/

Why Should I Sell My Multifamily Property?

Why should I Sell My Multifamily Property?

There are a number of reasons why people decide to sell their multifamily property, but most can be categorized into three groups: Problems, Opportunities, and Changes.

With this decision though comes the consideration of capital gains tax and how to ensure you are getting the most for the sale of your property.

There are several reasons why people do sell:

Problems:             

• Management
• Vacancy
• Maintenance
• Stress
• Health
• Debt
• Neighborhood
• Interest Rates

Opportunities: 

• Strong Market Values
• Alternate Investment
• End of the Hold Period
• Tax Savings

Changes:               

• Divorce
• Death
• Retirement
• Partnership Split
• Relocation
• Consolidation
• Diversification

What do I do with the sales proceeds? I don't want to pay Capital Gains Tax!

There are several options for sellers to defer or minimize capital gains taxes:

• 1031 Exchange
• Delaware Statutory Trust/Deferred Sales Trust  (DST)
• Tenancy in Common Investment (TIC)
• Installment Sale

How do I know I am getting the most money for my property?

We not only market properties for sale. We make a market for properties 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 with direct outreach to our investor database and an orchestrated competitive bidding process that yields higher sales prices. 

What is my property worth?

Contact Us to discuss what information is needed to complete a Complimentary Commercial Broker Opinion of Value (BOV). 

I’m not interested in selling at this time.

This is understandable as only about 5% of the market trades in any given year. We are also happy discuss any purchase or refinance interests and recommend some physical and operational changes you can make to add value to your property you will appreciate when you eventually sell.  

 

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/why-should-i-sell-my-multifamily-property/