IN CHIC DOWNTOWN CHICAGO NEIGHBORHOODS, Competition for Luxury Condo Rentals Drives Down Prices!
WITH HUNDREDS OF LUXURY UNIT OWNERS NOT FINDING A BUYER, MANY RENTERS FIND COMPARATIVE BARGAINS, AND ROOM TO NEGOTIATE!
Supply and demand!
For the last two years or so, as much of the Chicago Real Estate Market has languished, experts point to too much for-sale inventory, combined with fewer qualified buyers able to find a mortgage loan, as the reason for the doldrums here.
Indeed, in many of the most tony Downtown Chicago Neighborhoods - Streeterville, River North, and The Gold Coast - hundreds of unit owners, not successful in selling their units downtown, have elected to rent them out instead.
And many of these available-for-rent units are in true trophy buildings - the new Trump Tower, 600 N. Lake Shore Drive (where TV Celebrity Oprah Winfrey owns a luxury unit), and 600 N. Fairbanks. Rents here typically begin at over $1,500 for studio condos, and exceed $5,000 for the larger, premium-view units.
Today, with the supply of these available rental condominiums climbing every day, many reluctant landlords have negotiated their rent in order to avoid long-term vacancy.
Mary Ellen Podmolik, Chicago Tribune Real Estate Writer, in an article she wrote in last Sunday's edition, cites examples of one man who was able to negotiate a discounted $3,000 per month rent in a Streeterville Luxury High Rise - complete with top views, and premium appliances and amenities. The unit rented for $200 more to the previous tenants, and efforts by the unit owner to rent for as high as $3,500 proved unsuccessful.
One real estate agent from the Near North Side of Chicago compares today's downtown luxury rental market to the ability of a business traveler to rent a luxury automobile, or a style-conscious party goer to rent an expensive dress and handbag. In top-flight buildings, renters can temporarily enjoy the benefits of an $800M-plus condominium, and no one in the building knows they are renting the unit, rather than owning it.
And, in a few buildings, there is a real possibility of running into an A-list celebrity in the elevator, or the lobby!
Just like the Chicago Downtown Real Estate Market, downtown rentals have become very susceptible to supply and demand factors. According to Appraisal Research Counselors, in the same Podmolik story, nearly 2,000 high-end apartment rentals came to the market within the past year. At the same time, for the one-year period ending last October, only 894 of these apartments were rented out - thus creating an over-supply!
Two noteworthy rental projects will be added in 2009 in the Chicago Streeterville Neighborhood - Streeter Place and Aqua, both nearing completion. When finished, these two properties alone will add another 1,000 rental units to Downtown Chicago.
The supply of condos for rent should increase as well. Appraisal Research Counselors estimates 4,000 condo units were rented instead of sold between for the year ending October 31, 2008 - nearly double the same period for the prior year.
In 2009, many condo investors, who bought at pre-construction prices in 2006 and early 2007, as the market in Chicago boomed, originally intended to resell their units at a profit once they were completed.
The majority of these investors, however, now find their just-completed units are worth less than when they purchased them. Qualified condo buyers are hard to come by. And, for many, keeping the units as in-town rentals for themselves and their families is costly given today's economy.
To keep their cash flow manageable, many will decide to rent out their units as well - adding to the Downtown Chicago surplus of rental units.
And prospective renters, mindful of all this, will continue to try to negotiate an incredible deal.
Podmolik offers more info and several personal accounts in her Tribune story.
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