Midwest Experts Weigh in on Commercial Real Estate Trends for 2015

  

Barbara Gaffen

CHICAGO, IL (Dec. 11, 2014)  – With sales of Chicago-area apartments, hotels, retail, office and industrial properties on pace for the best year since the recession, Midwest real estate experts predict another banner year for commercial real estate in 2015 as new projects break ground and existing developments are brought to market.

Here are some specific trends they expect to see in the new year:

1. Rentals Continue to Raise the Roof

Perhaps no commercial asset performed better in Chicago this year than the apartment sector, especially new Class A buildings that commanded high occupancies, top rents and few, if any, concessions.

 Even Chicago’s suburban occupancy rate rose to its highest level in seven years in 2014, with rents predicted to rise 3 to 3.5 percent during 2015.

With developers on track to complete more than 3,100 apartments in downtown Chicago in 2015 and potentially 6,400 in 2016, some wonder if supply will outpace demand. To answer that question, a number of Chicago’s premier multifamily experts share their predictions for Chicago’s rental scene and other top rental markets in 2015:

Waterton Associates – David Schwartz

David Schwartz

“The homeownership rate has continued to trend lower as people of all ages have been drawn to the relative affordability and flexibility of the rental lifestyle,” said David Schwartz, co-founder and CEO of Waterton Associates, whose portfolio comprises approximately 20,000 rental units across the U.S. 

“This is especially noticeable among young adults, many of whom have held off on buying their first home in order to maximize mobility and, in some cases, save up money for a down payment.

“With millennials no longer feeling as much pressure to buy, many are in no rush to leave the amenity-rich rental communities they’ve called home for the past several years, which will continue to drive demand among both renters and investors in 2015,” noted Schwartz. Waterton acquired 10 rental communities in 2014 and plans to announce several new deals in the first quarter of 2015.

Tony Rossi Sr.

M & R Development and RMK Management Corp. – Tony Rossi, Sr.

“Luxury rentals in the city will continue to be in high demand, with strong occupancies driven mostly by Gen Y and millennials,” said Tony Rossi Sr., president of M & R Development and RMK Management. 

“But well-located, desirable suburban markets will also see an increase in new high-end rentals. These will be especially appealing to young professionals, families seeking the flexibility of renting and access to great schools, and the ever-growing boomer demographic that appreciates the maintenance-free lifestyle of a rental near their friends and family, yet offers walkability and transit access.”

M & R and RMK opened 73 East Lake, a luxury apartment tower in Chicago’s East Loop, in 2014 and plan to break ground on a high-end rental community in the North Shore village of Wilmette, Ill., in 2015.

Prime Property Investors – Barbara Gaffen

According to Barbara Gaffen, co-CEO of Prime Property Investors (PPI), value-add properties are a sweet spot in the multifamily sector due to their strong ROI. “With so many new Class A developments delivering next year, projects that are 10 to 15 years old will be considered bargains, as they can be updated to compete with many of today’s newest buildings at a fraction of the cost of new construction,” said Gaffen.

Estates at Fountain Lakes, Houston, TX suburb 

In 2014, PPI acquired Estates at Fountain Lakes, a Class A garden-style apartment community in suburban Houston – a city Gaffen says will continue to perform well for investors in 2015. 

“The Houston market is among one of the most vibrant multifamily markets in the country,” she noted. “By enhancing common areas and upgrading kitchens and baths at Estates at Fountain Lake, we’ve been able to increase rents by $150 to $200 per month, showing that pricing improves and risk falls when you add value.”

For a complete copy of the company’s news release, please contact:

                                                      

 Kim Manning, kmanning@taylorjohnson.com, 312-267-4527

 Abe Tekippe, atekippe@taylorjohnson.com, 312-267-4528