Which Downtown Chicago Neighborhood is Winning the Leasing Race

KIG Analytics has been tracking the absorption across the city of all major deliveries for the past two years. What can this data tell us about where renter preferences and demand is headed?

As the Chicago market approaches the waning hours of this cycle, new multifamily developments continue to arrive across several key submarkets.

In River North, many developers rushed to get projects off the ground in light of new, citywide affordability requirements announced in 2015. This resulted in a concentration of deliveries in 2017, totaling over 1,500 units. Meanwhile, the West Loop is finally poised to see the arrival of a large wave of multifamily product. Developments have been in the works since the area emerged as a nexus of new Chicago office developments and corporate relocations. Between 2018 and 2019, the West Loop is expected to see over 5,000 units delivered.

How have each of Chicago’s submarkets fared during 2016–2017? 
First there are the raw total absorption numbers for each area:

Data sourced from property management of all tracked developments. For a full list of our tracked developments, please contact our Analytics team

For full submarket and month-specific data, please go to our interactive version at kig-analytics.github.io/absorption_tracking/. For the best viewing experience, please view the above chart on a laptop/desktop.

From this data, the seasonality of the Chicago multifamily market is clearly apparent. Also observable is that submarkets with the highest absorption vary from year to year. During the peak of leasing season in August of 2016, the South Loop led absorption with 159 units — totaling over 40% of all units leased in that month. Whereas at the peak of July 2017, River North edged ahead at 143 units or 31% of units absorbed.

While seasonality is a critical factor to consider, it can obfuscate which submarkets maintain a market share of absorption throughout the year. To see beyond this factor, a normalized stacked bar chart is useful:

From this visualization, it is much clearer which areas have taken a larger share of incoming renters over the past two years. River North has grown from an 8% (March 2016) share of core renters to 56% in the latest numbers from February 2018. This is at least partially a result of the arrival of the numerous developments in River North over the course of the past year: 640 N Wells, 3Eleven, The Gallery on Wells, The Hudson, Exhibit on Superior, Aurélien, Hubbard221 and 8 East Huron. In a future piece we will investigate the ratio of these two components to determine which neighborhoods are receiving an out-sized share of renters given their development pipeline, and which are performing poorly.

The West Loop has steadily grown its absorption to 15% in the most recent survey of property managers. This correlates with the 2017 development deliveries, such as Landmark West Loop and EMME. As River North new arrivals begin to stabilize and West Loop continues to heat up over the course of this year, expect a steadily larger share for the West Loop.

The Loop and South Loop continue to take smaller and smaller shares of overall absorption in Chicago Core. While this can be largely attributed to a pause in deliveries in both submarkets for 2017, there are other interesting signs. While not displayed on either of the above charts, the South Loop as a whole encountered a net loss in absorption over the period of September 2017 to November 2017. KIG Analytics will continue to watch this situation closely as a large quantity of deliveries are on the horizon for the South Loop (an estimated 5,000+ units in 2018–2019).

If you missed our article on concessions in Chicago you can find it here. Next, we continue to explore the idea of how much neighborhoods matter to the 2018 Chicago renter by taking a look at the migration of renters between Core submarkets— and where renters new to the city are going first.