Spring ’11 Pricing Update—Sky High Pricing & Limited Availability

Spring is always the busiest time of year for downtown Chicago apartment rentals and this season has been no different.  Even though Chicago still feels like February, people are getting ready to move and excited about the upcoming thaw.   There is one big problem though:  apartments are scarce and prices are high….really high!

Day after day I get calls and emails asking for apartments with washer/dryer in unit, granite, stainless steel and the new luxury finishes everyone is seeking.  People are also telling me they would like to spend $1600 on a spacious 1 BR..  Unfortunately, that is simply not available.  True luxury apartments have gone up as much as 20% since last year and it’s tough to find a luxury one bedroom any less than $2000…and that doesn’t include parking!

Here are the top three questions I have been asked lately and my take on the market:

Why are prices so high?

The answer is quite simple:  supply and demand.  There is a shortage of luxury apartments available for two reasons.  First, all of the brand new, fancy places that came to market in 2009 and 2010 are occupied.  People received great specials last year and they love their apartments.  That leads to the second reason.  The people that rented these luxury Chicago apartments don’t have any newer options and don’t want to buy condos, so there is little incentive to make a change.  Owners and management companies are increasing rent just enough to maximize revenue and it doesn’t make financial sense to move.  Supply and demand, plain and simple.

When are prices going to come down?

It’s going to be a while.  There are no new downtown luxury properties set to deliver until 2013 and unless the Chicago condo sales picks up tremendously, people are just going to keep renting the nicest properties they can.  There will be a slight dip at the end of the year as the weather turns but the prices and lack of availability is here to stay?

If the prices are so high, what can you do for me?  Is there any negotiation?

As I mentioned, there is not a lot of availability so owners/management companies are not very likely to negotiate.  The value we bring in this type of market is our market knowledge.  We know the buildings that have vacancies and can find the best value such as lower floors to bring the price down and dog floor options that are even harder to find.  We stay on top of these luxury properties each and every day to get updated availability and once you become our client, you are the first to know.  The concept of client has become even more important in this environment.

There is no question prices are high and it’s not as easy to find apartments these days.  However, downtown Chicago has never been a better place to live for the nightlife, restaurants, and world class shopping.  Just be glad it’s not New York!

Apartment Finding For A Cause: Common Threads

I have a passion for helping people.  That’s partly why I’m in real estate.  I love helping people find their new home.

This year, I had a new goal for Luxury Living Chicago.  As a small business owner, I wanted to give back to the Chicago community. A community that has given so much to me.

A charity close to my heart is Common Threads, a non-profit that educates low-income children about the importance of nutrition and physical well-being.  I’ve volunteered with the organization for the last five years helping out in the after-school programs and attending fund raising events.

But I wanted to do more. I wanted to combine my love for my business with my involvement in Common Threads.

For every apartment rented in 2011, Luxury Living Chicago will donate a portion to Common Threads with a goal to raise $15,000. That is the amount needed to sponsor a 10-week after school cooking session for local Chicago children.  The after school program teaches kids ages 8-12 basic kitchen skills, cooking techniques and the importance of fresh ingredients while preparing healthy ethnic cuisine.

To kick-off the program, Luxury Living Chicago hosted an event at Mercadito in River North.  We invited our clients, building partners and industry friends to encourage participation in our charitable efforts.

For more information on how we are giving back, to check our progress, or to donate, visit our charity page!

Lots of New Luxury Chicago Apartments on the Way..

In a recent article published in the online (subscriber only section) of Crain’s Chicago Business, writer Alby Gallum reports that there are nine new residential high rises either under construction, set to break ground or seeking financing in downtown Chicago.  This equates to an additional 3400 units set to hit River North, Streeteville, the Loop and Old Town by the end of 2012.   That is a lot of fancy new apartments!

Just to put it in perspective, we saw about 3000 new apartments come online in the past 18 months.  Most of those properties are doing well and are approaching stabilization, even amidst this depressed economy.  In fact, Class-A apartments (the new and nice ones that everybody wants) are expected to increase in price by about 10% over the next 12 months.   Rentals are hot right now and prices are going up.

But I have to stop and ask the question?  Is this too much?  Are we headed down a path where we build too many apartments and still have a glut of unsold condos to boot?  How many people are really moving to Chicago?

Ultimately, this aggressive building spree is going to help renters in the long run.  Prices are going to go up over the next couple of years but when these new buildings open, incentives will be there and the level of finish, amenities and variety of floor plans will provide a great value for luxury downtown apartments.  All of these new buildings are going to compete with each other and that always helps the renter.  Brand new is great and the wait doesn’t seem too far off.

2011: The Year to Rent it and Forget It

For the past couple of years, we have been inundated with conflicting articles, blog posts and news stories about the housing market.  Some argue we have hit rock bottom and others opinion we still have another 15-30% to drop.   Our potential clients are confused and no one can provide a straight answer.

In a recent interview with CBS’ 60 Minutes, Federal Reserve Chairman Ben Bernake said “…housing can’t get much weaker.”  But in that same interview Bernake defended the $600 billion dollar stimulus needed to help “…keep [mortgage] rates low and improve housing.”  If Bernake is confused, how are we expected to tell our clients it’s a great time to buy or sell?

The answer:  we are not.  It’s not a great time to buy or sell for some.  It’s a great time to rent.

For years there was a cache that came with owning a home.  It didn’t matter you paid exorbitant assessments and taxes or needed to repair something every week.  You were a homeowner and you had made it.  Now the tides have turned.  It has become not only socially acceptable to rent, but viewed as the smart alternative. And there are definitely some great rental options these days.

Specific to the downtown Chicago luxury market, there have been a dozen rental properties with 3000 brand new units that have come online during this “down time.”  These are buildings with state of the art amenities and truly modern finishes. These are not starter apartments.  These are homes that people are choosing to live in rather than losing sleep debating if buying is a good investment.  And more condos are being converted to rentals every month.  This trend promises to continue.

Additionally, other downtown neighborhoods and many surrounding suburbs have seen such declines it’s simply not worth selling.  This has created even more rentals and a very unique opportunity to rent condos and houses many cannot afford to buy in this ever-evolving economy.

When making housing decisions, people tend to compare the rent vs. buy ratio.  While in part a great tool, the one aspect this guide does not provide is peace of mind.  We don’t know if the price is going to go north or south right now.   It’s just too volatile.  We do know you can get a great rental property, love where you live and not worry about it for at least a year.  2011:  Rent It and Forget It.

The Importance of Updated Pricing

It happens all the time.  I’ll speak with a client that says they have seen the same property advertised multiple times on Craigslist with varying prices.  This occurs for a few reasons:

The Bait & Switch – Bad brokers/apartment locators often pull a bait and switch with their advertising.  Clients will see a pretty ad for an apartment for a very low price and call the broker about the specific property only to find out that the unit has been “rented,” but there are similar units available at a much higher price point.  This is very bad business and a waste of time for everyone.  If it looks too good to be true, it probably is.

Lack of Commitment – Often times, brokers/apartment locators will get lazy and forget or put off changing the pricing of their advertisements.  Pricing and availability changes on a daily basis, sometimes hourly in the busy season, and everyone needs to do their homework to best service their clients.

Outdated Pricing – This is different than a broker/apartment locator misleading the consumer or not updating their pricing.  Sometimes pricing is wrong because partner buildings and apartment management companies do not regularly share their latest pricing and availability.  A key component for the apartment rental buildings to understand is the importance of real time pricing for those helping to bring qualified prospective tenants to their buildings.

I recently met with David Vivero, CEO of RentJuice, a new online marketing tool available to apartment management companies that creates real-time hot sheets sent to marketing partners and apartment locators.  I think this tool and similar products, could be very effective in the downtown Chicago apartment rental arena, as it would clear up pricing confusion and make the process of renting an apartment more efficient.  Efficiency is what Luxury Living Chicago is all about.

If a leasing management company is not ready for such a tool, a simple, regularly distributed email with updated pricing goes a long way!

Luxury Living Chicago Featured on CNBC.com – Renting vs. Buying

I am very excited to share that last week I was quoted in a CNBC.com article about the shift towards renting a luxury apartment in lieu of home ownership.

Joseph Pisani, the author of the story, sensed a trend in the housing market where people who can afford to buy property, are instead choosing to rent luxury apartments.  Pisani contacted me to see if this was indeed happening in the luxury apartment rental market in downtown Chicago and I told him yes.

Where owning a home used to come with a status symbol, the current housing market and all of its foreclosures and loss in value have now made renting the more responsible choice.

Those who had been saving for down payments are now hesitant to purchase a home and people who have seen the value of their property decrease are now selling when they can and renting until the market stabilizes.

The time is certainly right for renting a downtown Chicago apartment.  This past year, there have been 2,500 brand new rental units that have come online and another 1,300 slotted for the next 24 months.

Rumor – Peshtigo Condo Tower Going Rental

Rendering of The Peshtigo

Rumor has it that The Peshtigo, which was originally slated to be a 57 story condo development, will now turn rental.  The Peshtigo condo project was scrapped as sales slumped.  Agent X for Chicago Agent Magazine is reporting that Related Midwest will now develop the building as 500 rental units in the Streeterville area.  The company also has plans to change the building’s name.

This is a truly exciting development, as this will be the first luxury rental building in the Streeterville neighborhood since Streeter Place opened in 2009.  The demand for downtown Chicago apartments in the Streeterville area is high and as the current buildings in the neighborhood usually remain at 95% occupancy or higher, rental apartments are lacking.

Furthermore, if Related Midwest outfits this building right with condo quality finishes and plentiful amenities, they will have a homerun on their hands.

We will stay on top of this story as it develops.

Apple Store Adds Even More To Lincoln Park’s Clybourn Avenue

Apple Store

Apple has opened a new store in the Clybourn Corridor of Lincoln Park.  For those that frequent this section of town where Clybourn, Halsted, and North all intersect, the months of construction that congested the area have now given way to a beautiful new glass structure and renovated Red Line station.

This bustling area is a stones-throw away from the hot River North neighborhood.  It is also home to the gigantic Whole Foods that opened last year as well as other larger retailers such as West Elm, Best Buy, Pottery Barn, Restoration Hardware and Crate & Barrel.  It’s also stocked full of condos and townhouses and features SoNo a luxury high rise condo building that has been slow to sell.

SoNo

Whole Foods Market

This neighborhood never knew what was coming and the traffic jams on Saturday afternoons certainly demonstrate how this area was never intended to be such a destination for consumers.  Irregardless, that’s just what it is and word is that the long postponed New City development will finally get the green light to begin building.  However, they have decided to nix the plans for residences within the development and will now be all retail.

One West Superior – Still Living in the Good Old Days of Real Estate

It has recently been announced that the River North high rise One Superior Place (1 W. Superior) is for sale.

The owners, Brookfield Asset Management Inc., have not set an asking price, but Crain’s is reporting that Brookfield is hoping to put a $260 million price tag on the property.

In the current real estate market, where investors are snatching up empty properties for forty to seventy five cents on the dollar, a $260 million asking price seems high. But this 809 unit building is 98.8% occupied (according to Appraisal Research), which is probably what is putting those dollar signs in Brookfield’s eyes.

One Superior Place has always maintained notoriety. It’s the building everyone interested in living in River North always asks about, but lately has been passing on. This is because there is a plethora of new, condo-quality properties in River North with competitive pricing.

Lately our clients have been willing to give up the prime central location and tremendous amenities that One Superior Place offers, in favor of more modern and updated finishes, which One Superior Place’s units lack.

It will be interesting to see what will happen with this sale and if the new owners will invest the needed capital to ensure that One Superior Place remains a Class-A building for the long haul.

A Whole Foods in the building is nice, but granite, stainless steel and hardwood floors in unit seem to be trumping that these days.

How Do Locators Get Paid? And What Makes a Good Locator?

A lot of people ask how locators get paid. There is a misconception that if you work with a locator or apartment finder, you wont get a good deal because the property or landlord needs to pay out a commission.

This is not the case. And if you find a good locator, you even have a chance of paying a little less in upfront fees. A good locator will have positive relationships with properties and landlords and might be able to work a better deal.

Typically a locator will earn a one month’s rent commission for their services. This is paid by the property or landlord.

A Chicago apartment finder should never charge a client for their services. It is 100% free to the consumer.

How can you tell if a locator is worth the commission they make? It’s all about your initial conversation.

Do they ask you any questions about your search outside of your move date? Or do they simply schedule a showing and figure they will get the information when they meet you.

The types of questions a locator asks are very indicative of the service they will offer. A locator that asks extensively about your search criteria, price range and motivation for moving will probably have several properties lined up to show you that match exactly what you are looking for.

A locator that asks nothing except the time you are available to tour will end up showing you what they want you to see, not what you want to rent.

Don’t be hesitant to work with an apartment locator, but be selective about the type of locator you are touring with.