Crain’s this week reported that Class A apartment buildings have increasing rents and is on pace to continued growth as more residents seek rental options. Demand has grown based on economic uncertainty and employment stability. Demand can also be credited to individuals moving closer to work & strategic metropolitan areas, as they relax on automobile usage, move out from friends and family or re-establish credit.
The occupancy rate at top-tier downtown apartments rose to 94.5% in the second quarter, up from 93.6% in the first quarter and 93.4% in the year-ago period, according to a recent report by Appraisal Research Counselors, a Chicago-based consulting firm. It was the highest Class A occupancy rate in nearly three years.
Net effective rents, which include concessions such as free rent, rose to $2.22 a square foot in the quarter, up 2.8% from the first quarter and 2.3% from the year-earlier period, the Appraisal Research report says. (Crain’s http://www.chicagobusiness.com/article/20100830/CRED02/100839993/hot-downtown-apartment-market-piques-developer-interest)
Many investment groups with the ability to purchase and sustain large portfolios have also ramped up purchasing Class A buildings and utilizing them as cash flow investments waiting for the economic climate to change.
With many unable to qualify for financing, or worried about the financial health of the market, the rental market can continue to improve. With demand growing, expect not only the occupancy rate to improve, but rental prices to rise as well.
Sherwin L. Sucaldito, REALTOR®
Member of The Institute of Luxury Home Marketing
Member of the Real Estate Buyer’s Agency Council, ABR
Certified Residential Property Manager, CRPM