From Bloodbath to Bubble Bath: A River North Story
Think the sky is falling for multifamily in River North? Well think again.
For much of 2017, developers and investors alike worried of a potential “bloodbath” in River North due to a wave of competing new deliveries arriving over the course of the year. KIG CRE has been tracking over 100 buildings in Chicago — a combined total of more than 40,000 units, including 6,499 units in River North. Our data points tell a different story: River North has performed above all expectations.
In 2017, River North accounted for 33% of all new units added to Chicago’s downtown. However, the submarket was responsible for 40% of the absorption for the same set of units.
Of River North’s 1,527 units delivered in 2017, 76% of them are already occupied as of May 31, 2018. Units delivered in the first half of 2017 are already 95% occupied, while units delivered in the second half of the year have already reached 65% occupancy. One should note that this number is also suppressed due to the arrival of the massive Gallery on Wells and its 442 units that delivered in July.
Though the occupancy of stabilized buildings in other core neighborhoods has dipped in some cases, this is also not the case in River North. Stabilized buildings here are averaging 94.6% occupancy in May 2018, the second-highest submarket average occupancy of stabilized buildings behind the burgeoning West Loop. In May of 2017, those same stabilized buildings in River North averaged 92.3% occupancy.
Not only does River North have the strongest absorption rate, concessions for this submarket have remained in check. While lease-up concessions were higher in the winter months throughout the city, the average rent concession offered for River North lease ups is currently at 6.33%. To put this in perspective, a building offering one-month free on all units with a 12-month lease would have a concession of 8.33%. Stabilized buildings are offering just 2.17%, with over half of stabilized buildings in River North offering no rent concessions at all. New buildings in the South Loop, West Loop and River West are offering greater concessions despite delivering only 19%, 9% and 7% of new units since 2017, respectively.
Lease-up assets in River North command some of the highest effective rents in the city, averaging $3.39 psf. Stabilized assets in River North, averaging $3.15 psf, reign supreme over other submarkets.
As of June 1st, there were only 290 units left to deliver in River North for 2018. And once those are leased up, it’s smooth sailing for landlords until Wolf Point East and One Chicago Square settle into the mix in 2020.