Why The Chicago Suburbs Are a Strong Contender in The Rental Market with Brian Karmowski
By now most have seen or heard about the recent article from RentCafe crowning Suburban Chicago as the ‘hottest rental market’ thus far in 2024 (Chicagoland Matches Miami). The research was also featured in the New York Times. RentCafe’s team analyzed Yardi Systems apartment data across 137 rental markets in the U.S and the data was sourced directly from market-rate large-scale multifamily properties of at least 50 units. Unique data points such as the number of renters competing for a vacant apartment were utilized as well as more standard measures like occupancy and renewal rates.
It’s a fascinating change in narrative and a significant about-face for the Midwest that has historically played second fiddle to the Sun Belt region which has dominated the ratings.
The question is, can the Suburban Chicago market continue to stay competitive in the coming years? A few reasons why I think the suburbs will absolutely continue to be a serious contender…
Supply, or Lack Thereof. The article states that new construction rental units account for only a .11% share of the TOTAL SUPPLY of rentals units in Suburban Chicago. At Essex, our suburban team has 341,914 units databased for buildings with at least 50 units. This would imply that only 376 units were added in the second quarter of 2024, or 1,504 units on an annualized basis – not nearly enough to keep up with demand and should only add to the competitive nature of the suburban rental market.
Strong and Diverse Workforce. The Suburban Chicago workforce is roughly four million strong, with healthcare as the largest sector employing roughly 10%, followed closely by retail trade, manufacturing, professional services and educational services. The diversity here plays an important role in the stability of the workforce – not only are employers (and employees) drawn to the area for opportunities, but the range of industries will also help sustain the workforce if one or two sectors hit a slump.
Corporate Attraction. While the exact number varies, it’s estimated 100 to 150 companies, both big and small, have relocated to the Chicago suburbs in the last 10 years. Not a jaw-dropping figure but demonstrates the consistent demand from corporations. While the city has made headlines with the recent loss of corporations such as Citadel and Boeing, the suburbs have mostly avoided such significant losses.
Population Growth. The last 10 years have certainly brought about fluctuating population growth, with an estimated increase of 1-5%, but the story here is consistency. While other metros have seen recent declines, the Chicago suburbs continue to experience respectable population growth that will continue to support strong rental demand.
Rent Growth. Believe it or not, the Chicago suburbs have experienced roughly 30-40% rent growth on average in the last 10 years. While this varies widely by city, and likely mimics other metros across the county, it’s no small feat and will continue to be a contributing factor to the competitive nature of the rental market.
Growth of Suburban Downtown. A less talked about factor that I believe will continue to aid the suburbs in attracting renters is the growth of downtown regions within many suburbs. Places like Arlington Heights, Wheaton, Libertyville, Downers Grove and Orland Park have seen significant investment from businesses developing new restaurants, bars and retail offerings. The growth of these districts has helped feed the demand of residents seeking high-end restaurants and nightlife that only Chicago could historically offer. Such offerings have reduced the draw of big city living and met the demand of locals – both young and old. Furthermore, most of these downtown entertainment districts are in close proximity to Metra Stations, providing easy access to Downtown Chicago and surrounding suburbs.
Weather. No, really. As I write this in mid-October, the high today was 75 degrees. The weather the last several days, and weeks, has been phenomenal – sunny, low humidity and little-to-no rain. While most Chicago knows this recent trend is to be taken lightly, most can attest the weather has seemed milder as of late – shorter winters, lengthy autumns and an overall ease in the extreme cold. The milder climate should only help the draw of the Chicagoland area and offer an escape to so-called ‘climate refugees’ seeking our abundance of fresh water and absence of extreme weather events such as hurricanes, droughts, and heat waves.