Apartment construction increases in the Chicago suburbs

The construction of apartments in the Chicago suburbs reached some high marks in 2016:

Meanwhile, in the suburbs, more apartments were opened last year than in any time in the past 20 years and demand for those units meant suburban rents grew more than the increases downtown, according to research by Appraisal Research Counselors…

The rents in new or almost-new units in the suburbs increased 6.7 percent in 2016, while they increased just 2.85 percent downtown, according to Appraisal Research. The median rent was just $1.39 per square foot in the suburbs in 2016, while downtown it was $2.89 a square foot for space in a newer building. In other words, for 1,000 square feet a renter would pay on average $1,390 in the suburbs and $2,890 for one of the new downtown apartments. An older but well-kept Class B building downtown would be $2.52 a square foot, or $2,520 for 1,000 square feet…

The strongest occupancy in 2016 was in DuPage County, with 95.7 percent of the apartments full and the median price of a two-bedroom apartment at $1,315. Northwest Cook County was 95.4 percent full with a two-bedroom apartment averaging $1,390. The weakest area was the North Shore at 93.8 percent occupancy and a two-bedroom apartment at $2,446…

“From Schaumburg to Naperville, you are starting to see new construction,” said Stephen Rappin, president of the Chicagoland Apartment Association. It’s a trend that’s occurring nationally after the surge of construction in downtown areas.

This is where the debate between whether cities are growing or suburbs will win the day breaks down. What if the American future is denser suburban development and a shift away from single-family home ownership even as people stay in the suburbs? This would represent a change from “typical” suburban life – single-family home, lawn, lots of private space – while better mimicking some urban conditions such as denser housing, renting, and giving up a home to be near certain amenities.

As this article suggests, it is not surprising that the suburban apartment demand would be high in places with more economic and quality of life opportunities, places like Schaumburg and Naperville that have little greenfield space but where people would still want to live. Just like Chicago where apartment construction has boomed in the Loop but lagged elsewhere, a similar process will likely take place in the suburbs. This may be good for developers since there will be high demand for certain places but isn’t necessarily good for aiding issues of affordable housing.

Study suggests Chicago has too much apartment parking

A new study finds there are too many parking spots for Chicago apartments:

A single underground parking space can cost $37,000 or more to build, Smith said. Developers in Chicago are generally required to build one parking space for every apartment unit, which has led to a gap between supply and demand, and a fixed cost that is passed on to renters, he said…

As part of its yearlong study, Smith and two colleagues visited 40 residential parking facilities in the middle of the night last summer to survey occupancy. The properties ran the gamut from affordable to luxury rental apartments in Chicago and suburban Cook County and included some older buildings that predated the parking requirements ordinance. The research team discovered lots of open spaces.

On average, the buildings supplied .61 parking spaces for every unit, but used only .34 spaces per unit. Adjusted for occupancy — vacant apartments that don’t need parking — the lots were about two-thirds full, according to the report…

In the suburbs, where public transit is less accessible and car travel is a way of life, municipalities often require developers to provide more than one parking space per apartment unit. The study found the parking oversupply extends to the suburbs as well.

As Americans drove more – even in cities – local officials tried to keep up by building roads and highways, planning communities around automobiles, and writing regulations that provided plenty of parking. All those giant parking lots outside of big box stores or shopping malls are the result of planning for once-a-year parking needs while the rest of the year those lots sit empty, look ugly, and contribute to water runoff issues.

But, what happens if driving habits change? Or, planning as a field changes from emphasizing cars to greener options? As the article notes, Chicago has changed regulations for new apartment developments near mass transit. This seems like a win-win for developers: they have to devote less space for parking which can then go toward units and this may even drive up the price of the parking they do build because there is a tighter supply. At the same time, I wonder if this appeals to certain urban homeowners – particularly younger residents rather than all those Baby Boomers supposedly moving to cities – and not others.

29% of suburban residents are renters

A new study of the 11 biggest American cities finds that an increasing number of suburbanites rent:

About 29 percent of suburbanites living outside the nation’s 11 most populous cities were renters in 2014, up from 23 percent in 2006, according to a report released Tuesday by New York University’s Furman Center real estate think tank and the bank Capital One.

The finances of home ownership since the mortgage meltdown might be a lead reason for the change, but the cost of renting also is rising in most of the biggest metropolitan areas, the study found…

Renters

 

 

 

 

 

 

 

 

Traditionally, suburbs have not been very open to renters, particularly when it comes to apartments. The stereotypes of renters are that they care less about the community, they are more transient, and that their dwellings drive down housing values. But, two major things changed that could contribute to the effects of the economic crisis:

  1. What if more new renters are renting single-family homes rather than apartments? The same stereotypes regarding renters might still apply but these renters are not as easy to spot and look like they are living the suburban dream of homeownership. Plus, isn’t having renters in single-family home preferable to all the vacant homes due to foreclosures?
  2. There are more suburbs than people often think that don’t look like wealthy bedroom communities. In other words, these renters might be clustered in particular communities where housing is cheaper and apartments are more plentiful but renting in wealthier suburbs may not have changed much.

It will be interesting to see how suburban communities respond to the uptick in renters. New regulations? Reconsideration of how renters should be viewed?

Peregrine falcons take over Chicago apartment balcony

See what happens when peregrine falcons take over an city apartment balcony:

It all started four years ago, when the birds began dropping by the building’s balconies early each spring. In April 2014, the couple got pretty cozy on Dacey Arashiba’s terrace. Arashiba, an I.T. consultant, was delighted, but his neighbors, put off by the birds’ loud noises and poop, complained. “My building manager told me the birds had to go. Maintenance staff shooed them off the balcony,” Arashiba says. “And that was it. For a while.”

But in June, the birds came back. A week later, the pair had laid three eggs in Arashiba’s flowerbox (“I am an occasional, lazy gardener and hadn’t replenished the dirt in a few years,” he admits.)

Now on the offensive, Arashiba called Mary Hennen, director of the Chicago Peregrine Program, who told him that falcons are federally protected under the Migratory Bird Treaty Act (and had previously been on the state and federal endangered species lists). It’s highly illegal to harass them (building management complied)…

Arashiba let Massey crash in his condo for a full month so the 23-year-old photographer could get close-up pictures of the birds as their chicks grew from tiny fluff balls to sleek (but spotted) youngsters. Massey’s assistant, Katie Stacey, was also there to help out with parts of the shoot, which required some precarious balancing of equipment to fully capture the birds’ vertigo-inducing existance.

There are some great pictures here. I wonder how many city apartment dwellers would have had a similar reaction to the Arashiba’s as their balcony became a lot more difficult to use. Would many have sided with the neighbors who complained? And if the birds had been chased away, could they have easily found a nesting site elsewhere in the city?

See an earlier post regarding a book about the birds of suburbia (“suburdia”).

Storing wealth in New York apartments, contemporary art

According to one asset manager, the wealthy are now storing their wealth in apartments and art:

“Historically gold was a great instrument for storing of wealth,” the chairman of BlackRock Inc. said at a conference in Singapore on Tuesday. “Gold has lost its luster and there’s other mechanisms in which you can store wealth that are inflation-adjusted.”…

“The two greatest stores of wealth internationally today is contemporary art….. and I don’t mean that as a joke, I mean that as a serious asset class,” said Fink. “And two, the other store of wealth today is apartments in Manhattan, apartments in Vancouver, in London.”…

The median sale price for existing condos in Manhattan jumped to a six-year high of $1.3 million in the first quarter, driven up by buyers seeking alternatives to out-of-reach new developments, according to Corcoran Group, a brokerage. In the U.K., asking prices for property climbed to a record in April as values in London rose 2.5 percent, Rightmove Plc said on Monday.

Three quick thoughts on this:

1. Good thing New York City has a boom in luxury building. Those underground expansions in wealthy London neighborhoods don’t hurt either.

2. What is the point where these apartments turn into a luxury housing bubble? There are only so many uber-desirable locations and only so many people who can afford these luxury places. If this part of the housing market collapses, what happens?

3. I recently read 33 Artists in 3 Acts by sociologist Sarah Thornton and this trend among the wealthy certainly has had an effect on the art world. There are some interesting discussions amongst artists involving money, commodities, and related topics.

Dilemma: replace older housing with “cheesy apartment complexes” or McMansions?

If older housing is going to be torn down, would you prefer it be replaced with apartment buildings or McMansions?

McMansions are going up one after another in my neighborhood on the Burbank hillside. Unattractive boxy additions are being built, leaving little yard space, and houses are being torn down to make way for bigger two-story barns. The reason for this may be because of the need for more room to accommodate today’s lifestyle — computers, media rooms, etc. It does spoil the whole appearance of the neighborhood. However, what’s worse it that ever since the ’60s,charming old cottages have been razed to make way for cheesy apartment complexes. Older apartment buildings with space and courtyards have been replaced by bigger apartment blocks with no outdoor areas. Maybe McMansions are the lesser of two evils.

Of course, these aren’t the only options available in many places. Yet, if land is expensive, McMansions and apartments could be appealing to builders and developers: the first can maximize square footage and have a higher selling price while the second increases the number of housing units (which could also help provide more housing in places that struggle with higher housing values).

If I had to guess, more Americans would choose to live next to a McMansion than an apartment complex. McMansions receive a lot of criticism, particularly in older neighborhoods where the new homes don’t fit the character or architecture. Yet, apartment complexes may be disliked even more by many suburbanites, even in the abstract, let alone next door or down the block. Apartments are perceived to attract different kinds of residents – lower class, different racial and ethnic groups, more prone to crime, more transient, less invested in their housing unit and the community – compared to suburban single-family homeowners.

Thinking more broadly, what housing options might be disliked more than apartments? Maybe trailer parks. Or group homes. Or public housing, whether in larger concentrations or scattered-site.

Chicago area apartment market continues price increases

With homeownership still moving downward in the United States, the apartment market in the Chicago suburbs keeps going up in price:

The median net rent in the Chicago suburbs rose to $1.29 a square foot in the fourth quarter, another record, up 4.7 percent from a year earlier, according to a report from Appraisal Research Counselors, a Chicago-based consulting firm. The occupancy rate was 95.3 percent, versus 95.1 percent a year earlier.

Suburban rents have increased five years in a row—they rose 21 percent over that period—as more people have held off on buying a home, either because they can’t get a mortgage or are wary of owning after the housing crash. More recently, the improving job market has boosted demand for all housing, and apartment landlords are getting their share.

On the supply side, new developments are sprouting up from Naperville to Northbrook. Developers completed more than 3,300 apartments in the suburbs over the past year, the most in a decade, and another 2,700 are under construction, according to Appraisal Research…

Yet the revenue side of the equation is about as good as it gets for suburban landlords. Market revenue performance, a metric that combines the occupancy rate and median net rent, hit $1.23 in the fourth quarter, the highest it’s ever been, according to Appraisal Research.

An interesting housing market these days. Starter homes are not being built. New McMansions are back even as older McMansions sell briskly. People are considering disaster chic. The luxury market is booming in big cities like New York.

If apartments are indeed popular because they offer more short-term flexibility, how many suburbs will allow the construction of many apartments? Historically, wealthier suburbs in the Chicago area tend to avoid apartments and their more transient residents. So, I would guess most of these new suburban apartments are actually higher end, the kinds of places appealing to young professionals or the just retired and often located near cultural or transportation amenities like denser downtowns and train stations. If so, more expensive apartments don’t help many in the housing market who still need reasonably priced and conveniently located housing in the Chicago region.