A post-pandemic increase in demand for housing in central Chicago is spurring a building boom for apartments in the city.
“With downtown rents back at all-time highs, the apartment development drought is over,” Crain’s Chicago Business has reported. “Investors and construction lenders are eager to finance new projects again after closing their pocketbooks last year, as rents and occupancies spiraled downward during the coronavirus pandemic. Without financing, many developers just had to wait out the downturn. They’re not waiting any longer.”
As an example of one of the larger developments, Crain’s reported on work on a 43-story apartment towner at the corner of Randolph and Peoria streets in the Fulton Market District. Meanwhile, work is underway on a 224-unit apartment building about four blocks west. As well, in the South Loop, a 41-story riverside tower, The Reed, is being built with 224 apartments and 216 condominiums.
“There’s a lot of money chasing deals now, so you have more options,” Darren Sloniger, president and chief investment officer of Marquette Cos., told Crain’s. Marquette recently scored a construction loan for a 210-unit project at 140 N. Ashland Ave.
Loan terms “are exponentially better today than they were in July 2020,” Sloniger said. “I didn’t have much negotiating leverage (with construction lenders) back then.
Developers have drawn up plans for nearly 17,000 apartments in the greater downtown, Integra Realty Resources‘ Chicago office says.
Of course, not all of the projects will reach the market simultaneously. There are planning and approval processes, and many may not move from concept to building. However, Crain’s says that an increasing number of developers are finding financing for their projects, at terms not quite as good as before the pandemic, but certainly much better when COVID-19 slammed the brakes on the economy last March.
Getting a loan last year was “just really challenging,” mortgage broker Dave Hendrickson, senior managing director in the Chicago office of Walker & Dunlop, told the business publication. Now, “nothing is overheated. It’s just a good balance in the market, and there is actual competition for construction loans.”