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Time is ripe for renters
Slump in the market gives apartment-seekers good choices and incentives, from breaks on rent to parking
by Larry Finley

It's a very good time to be looking for a new apartment.

The supply is the greatest it has been in many years, because Chicago is in the worst apartment slump since the early 1990s.

For the renter looking for a new apartment, this means the possibility of incentives such as a month or two of "free" rent, or free parking or health club membership or even gift certificates of up to $1,500 to local retailers.

I've worked in the industry for 20 years and this is a very difficult time," said Anthony Rossi Sr., president of the Chicagoland Apartment Association. "We've lost 40,000 jobs in the metropolitan Chicago area alone because of the recession. That has hurt us."

The good news is that as the economy picks up later this year, jobs will return and the apartment market should regain its health, according to Rossi and others.

The recession and job losses were just two factors that pushed downtown occupancy rates to a low of 88.8 percent during the last quarter of 2001, according to John R. Jaeger, director of Appraisal Research Counselors, which tracks the local real estate picture. An occupancy rate of 96 percent is considered average.

The apartment market should begin to stabilize by the end of the year, and then begin to grow next year, just in time for rent increases of 3 to 5 percent for 2003, and 4 to 5 percent in 2004, Jaeger said.

The factors causing the current slump, Jaeger said, include:

Job losses, which became apparent in June of last year. But, predictions are that job recovery will begin in April and continue. Mortgage interest rates got renters "off the fence" and into condominium ownership, he said
Decline of the corporate suite market - units rented by national businesses for employees on temporary assingment here. "They gave back roughly 800 units in a relatively short period of time," Jaeger said. "That's the equivalent of two large apartment buildings."
The "hidden" rental market inside the condo market. Many units in new condominiums are being purchased by investors who rent them out, Jaeger explained.
Renters are "doubling-up" or moving back home to save money. "We are predicting that the rental market will follow the job market," he said. "Right now, we are predicting that the best-case scenario is that the later half of this year will be when the rental market starts to recover. "By 'recovery,' we mean that the rental market has to go up to the point that concessions stop," Jaeger said. "Then, you can get back to full occupancy again."

Most of the "free" month or two of rent means tha tthe reduction is pro-rated out over three or six months, he said.

A recent CAA survey conlcuded that: "We believe that there remains long-term demand for additional rental units, particularly smaller rental units. This is compounded given long lead times for deliveries [18 to 24 months] allowing for the economy to rebound and create jobs when the buildings are ready for delivery."

Ilene Collins, CEO of the Apartment People, 3121 N. Broadway, said their apartment finding service hasn't seen any slowdown in the busy spring search for new addresses.

Some of the larger apartment buildings will have 3 to 5 percent rent increases, she said, while "others are adopting a wait-and-see attitude depending on their vacancy rates."

"Some people may not raise their rents, but I don't see many who will actually lower rents," Collins said. "It's such a painfully difficult thing to do."

The economic downturn and the Sept.11 attacks hurt the market, she said, but people have to live somewhere.

"When the economy is bad, people rent apartments," she said. "When the economy is good, people rent apartments."

Apartments in Lincoln Park and Lake View continue to be much in demand, Collins said. Neighborhoods such as Wicker Park and Bucktown are popular because they are perceived as better bargains, Collins added.

"Studios and 1-bedrooms are very popular and easy to rent," she added. "And, if there is parking available, it won't sit there very long at all."

CMC Heartland Properties has so much faith in the economy's recovery that they are making the next phase of their popular Kinzie Station complex a rental building.

A 33-story tower with 262 rental apartments will be paired with the existing, sold-out condominium building at 555 W. Kinzie, according to Susan Tjarksen, vice president of CMC Heartland.

"There are a lot of choices in the rental market right now, and it is soft," Tjarksen said. "But, this is th third largest city in the nation. The market's not going to stay that way."

There is a substantial "renter-by-choice" market downtown that doesn't pinch pennies, she said.

Construction of the Kinzie Station rental building will start soon, and it should be ready in 2004, she said, just about the time the recovery is in full swing.

It will include 1-bedroom units with 618 square feet for about $1,500 a month. At the top will be penthouses, with 3 bedrooms and 3 baths, eat-in kitchens, family rooms, living and dining rooms and 20-by-20-foot decks, she said. Rents on these are set tentatively at $5,000 a month.

The finishes will be comparable to those in a new, high-end condominium. Future construction will include both rental and for-sale sections, she said, as well as a National food store and other amenities.

Likewise, in teh suburbs, there is still a big demand for high-end, new-construction apartment buildings in key locations.

The Northgate apartment complex, in Waukegan, has had a busy year thus far with no signs of a slowdown, according to Brian Hoffman, president of Red Seal Homes.

The 2-bedroom apartments, at 1,000 square feet, for example, are larger than most rentals in the area, he said. They include washers and dryers, individual heat and air conditioning, walk-in closets and patios or balconies. There are also 1 and 3-bedroom units. Rents range from about $850 to $1,500.

The complex has a fitness center and an outdoor pool. Concierge and garage spaces are available.

"We are getting a lot of Lake County professionals," Hoffman said. "A pretty good number of them lived within five miles and had been renting single-family homes or town homes. They found something new and solid and pretty good looking."

The development wil have 363 units when completed. more people are moving in now, Hoffman said, and there is a waiting list for the fall.

Mike and Jodi Brennan and their 8-year-old son, Michael Jr., moved to Northgate so they could be closer to Northwestern University, where Mike is pursuing a doctorate degree in music.

"We wanted to be as close to Evanston as possible, so my husband could easily commute to school," Jodi said. "We also wanted a really clean, spacious apartment as well. I also wanted a dishwasher and a swimming pool."

They looked at apartments in several suburbs before Northgate struck the right chord. " both my husband and I said that you can tell how good an apartment is by how clean the grounds are. From the moment we entered Northgate, we had an excellent feeling about the complex," she said.

The Brennans selected the 1,046 square foot Brunswick plan, with 2 bedrooms. Michael Jr. has the master bedroom to himself, along with this own bathroom, while the parents use the other bedroom as their master suite. "Our son ha shis own space, so he can do his own thing," Jodi said, "while we have a good-size bedroom, with a nice, roomy walk-in closet."

The spaciousness of the apartment also allows Jodi, wh is an opera singer, to practice her performances in the privacy of her home.

"We really like it here," Jodi said. "The amenities are wonderful. The people are nice. And the overall cleanliness and look of the development is great."

Apartment People, 3121 N. Broadway, Chicago. 9773) 248-8800.
Kinzie Station, 555 W. Kinzie, Chicago. CMC Heartland Properties, (312) 559-4559
Northgate, at Sunset Avenue and New York Road, a block east of Lewis Avenue, Waukegan. Red Seal Homes, (847) 623-0800.

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