Chicago area condo, apartment data back an upbeat attitude
BY DAVID ROEDER email@example.com February 12, 2013 5:56PM
Chicago skyline from the Adler Planetarium, February 3 2011. | Brian Jackson~Sun-Tim
Updated: March 14, 2013 6:43AM
Anyone who tries to judge the health of the residential market walks into a blizzard of data. You get the Case-Shiller numbers, the RealtyTrac numbers, the Realtor numbers, the changes in sales volume vs. sales prices, rentals per square foot, sales per square foot, new construction vs. resales and all the above for every imaginable neighborhood.
It’s enough to make your head hurt even after you’ve had your morning coffee. It’s safe to say that the data generally point to a recovering market gratifying for people who develop, finance or broker sales of residential property.
But to make that point, look at an unconventional indicator. Consider the annual luncheon downtown held by Appraisal Research Counselors, a firm that tracks the local condo and apartment market. The 2013 edition was held Tuesday and it was a jaunty, optimistic affair. People there had smiles — or at least the lean and hungry look — that have been missing from this affair the last few years.
Gail Lissner, vice president of Appraisal Research, picked up on my suggestion that the firm’s luncheon is its own barometer of housing. She said more than 350 people attended, compared with 270 last year, a clear rebound but still short of its all-time record of 385 in 2008. That year, people wanted all the intelligence they could get on the gathering storm.
Today, Lissner sums up the mood this way: “People have stopped asking if the market has bottomed out. That is so yesterday. What people are talking about is price appreciation.”
Price appreciation is a dangerous phrase. The housing bust had too many victims to be easily consigned to the past. But Lissner, who specializes in the downtown condo market, has reason for being positive.
Downtown condo resales rose 31 percent in 2012, to 4,675 as average prices were flat, itself an improvement from recent years. While the number of purchases of new condos downtown has fallen — from 1,891 in 2009 to 521 last year — every one of those more recent deals trims the unsold inventory. No major condo projects have been announced downtown since 2007.
Hard as it is to imagine, downtown condo supply may become an issue. Lissner said there are no unsold units in new construction north of the Chicago River except for the premium-priced Trump Tower and Ritz-Carlton Residences on Michigan Avenue, which is expected to start closing deals this year.
Smaller projects have been started, such as a 48-unit phase in the Park Monroe tower at 65 E. Monroe. Lissner said development opportunities exist for boutique projects.
Covering apartments, Appraisal Research Vice President Ron DeVries said the typical landlord never has had it better. Occupancies in the suburbs and downtown average out at close to 95 percent, a number that can’t get much higher because of the natural effect of tenant turnover, DeVries said. Concessions for new tenants, such as a month of free rent, are long gone.
Rentals, though, face a challenge from incoming supply. Developers have jumped into the market. DeVries said the most active suburban market is the North Shore, where 469 apartments are under construction and another 2,051 are planned, mostly in Evanston.
Downtown is expected to get 5,200 units through 2014, he said.
DeVries does not believe the supply will destabilize things. “It will induce some demand” because buildings are essentially full and the desire for living downtown hasn’t abated, he said.
Young renters want flexibility for job mobility, so buying doesn’t appeal to them, DeVries said.
Rental demand has increased even though job growth has been weak. If anything is going to bring down that market, it’ll be lousy job opportunities for a new generation.
CARLEY COMEBACK? Christopher Carley, builder of several Near North Side residential towers and the guy who got architect Santiago Calatrava interested in designing a lakefront spire, contemplated at least semi-retirement with the housing collapse. But now after success arranging a couple of deals, he wants to start a project downtown.
Through his company, Fordham Real Estate, Carley has a contract to buy the 22-story office tower at 32 W. Randolph that’s connected to the Oriental Theatre. He wants to convert the 240,000 square feet into 230 loft apartments, a project he figures will cost $55 million.
He said the timing is opportune because most of the space in the 1926 building will soon be empty. The largest tenant is our cost-conscious state government, which is getting out, perhaps this spring.
Carley is working with Don Faloon, former executive vice president at Prime Group Inc., who predicted a 15-month construction timetable and said work could begin this summer.
The project does not involve the theater, part of the Nederlander Organization. The Kalish family has owned the office tower for years.
David Roeder reports on real estate at 6:22 p.m. Thursdays on WBBM-AM (780) and WBBM-FM (105.9). The reports are repeated at 10:22 p.m. Thursday and 7:22 a.m. Sunday.