The Pulse of East Orlando Real Estate, With a Focus on Waterford Lakes

By Don Debat, Sun-Times Media

Rental apartments are in heavy demand among young living in the suburbs of Chicago, experts say.

A new survey by Appraisal Research Counselors Ltd. noted that young people—age 25 to 34 years—prefer the flexibility of renting, instead of buying, because renting is easier if they have to relocate in today’s tough job market.

That fact is very apparent in the Appraisal Research survey of more than 75,000 units in the seven county Chicago-area suburban market covering Cook, DuPage, Kane, Kendall, McHenry, Lake and Will counties.

That fact is very apparent in the Appraisal Research survey of more than 75,000 units in the seven county Chicago-area suburban market covering Cook, DuPage, Kane, Kendall, McHenry, Lake and Will counties.

Suburban apartment occupancy rates have improved significantly over the past year to 94.3 percent in the third quarter of 2011 from 92.9 percent during the same period last year, and the highest posted since the third quarter of 2007, according to Ron DeVries, vice president of Appraisal Research.

“Demand is being driven by a lack of confidence in the for-sale housing market, the inability to obtain a mortgage (due to lack of a down payment and/or credit issues), and the desire of 25 to 34 year olds to maintain flexibility for relocation,” DeVries said.

“It is significant to note the improvement in occupancy has come in conjunction with the 2.9 percent gain in net effective rent over the same time period,” DeVries said. “We expect occupancy to hold through the winter with additional rent-growth pressures in spring of 2012.”

Appraisal Research reported that homeownership rates throughout the suburban Chicago region are on a sharp decline, while rental occupancy and rents are on the rise.

DeVries noted that median net rent per square foot has risen 4.6 percent since the third quarter of 2008. In the suburbs, one-bedroom apartments now have a median net rent of $965 per month, while two-bedroom layouts are leasing for a median rent of $1,159 a month.

Concessions, marketing tools used to attract rental tenants, currently are in decline. Only 44.3 percent of suburban Chicago rental developments are offering concessions, down from 56.4 percent a year ago. A typical concession is one month’s free rent.

Appraisal Research also noted that there has been a spike in new transit-oriented rental development projects in the planning stages because of consumer demand for suburban apartments near Metra stations and major expressways.

However, DeVries noted that it remains difficult for developers to obtain appropriately zoned sites of significant size to accommodate apartment development because most suburban municipalities still favor condominium projects over rentals.

“Given the weak for-sale housing market, some suburban municipalities may soften their approach on rental development in favor of increasing the tax base,” DeVries predicted.

With apartment rents on the rise, owning likely is still a better long-term investment than renting. Homeownership in the Chicago area is less expensive than renting after computing appreciation and federal tax savings for mortgage interest and real estate tax deductions, experts say.