On July 25, 2013.
If "Blurred Lines" is the song of the summer, multifamily is the asset class. The Chicago apartment market's future looks just as hot as Robin Thicke's racy video.
We got the latest forecast from Marcus & Millichap VP Kyle Stengle (he also threw in some water skiing tips). He's seeing continued rent growth and decreased vacancies in the market, along with compressed returns in some of the city's secondary markets due to prices being driven up in the primary neighborhoods. There's potential for supply/demand imbalance (especially with the multiplying luxury units downtown), but new sources of demand like echo boomers and immigrant households are on the horizon. City vacancy will decrease to 4.6% this year, while effective rents are on track to grow 6.5%.
Supply is tight, but sales velocity picked up 30% in the last year thanks to easy debt and rising rents—the best North Side assets are trading at 5% to 6% cap, according to Kyle. (That beats keeping your money at the bank, in the mattress, or in an old jar in the garage that nobody knows about, not even your spouse.) A typical sale: Kyle recently sold 3600 N Oakley in Roscoe Village (below) for $1.8M. It's a brand new gut reno in a nice location, sold to a buyer who found attractive financing and wants stable returns. Though he still finds plenty of opportunistic buyers and syndicators looking for a more hands-on, distressed investment.
Interest rates will be a challenge, especially after the recent run-up on the 10-year Treasury. But the agency lenders adjusted accordingly, and there are still many other options with attractive rates, Kyle tells us. The other challenge that's been rehashed for months: overbuilding. Developers will complete 3,500 rentals in the city this year, followed by 2,000 more in 2014. Most of the developments are high-rises downtown, however, Kyle sees unstoppable demand in the city's desirable neighborhoods from the young professional renter pool that prefers the flexibility. Something to watch: he has talked to landlords whose renters have left to buy a condo, but we're not at 2005 levels.
One More First Job
Sperry Van Ness' Olivia Czyzynski tells us her first job was working for her aunt and uncle's mortgage brokerage at age 16. Her typical day: eating M&Ms, drawing pictures, rolling across the office in an executive chair, and faxing jokes to friends. (We think most recent grads would jump on a job like that. But who remembers how to fax?) Occasionally, she'd answer the phone or shred some paper. "Bless their hearts, they still paid me every week, and more than minimum wage," she tells us. "At least I can repay them now. I help them buy and sell their commercial investments and send them mortgage leads when I can!" Olivia and Wayne Caplan recently repped the seller of a 13k SF office condo at One Trans Am Plaza in Oakbrook Terrace in a bank-directed short sale for $1.3M.
Leasing Comps Reimagined
A new broker info alternative is coming to Chicago next month, CompStak's David Peterson tells us. The skinny on the Stak (team snapped above): it's a crowdsourced database of lease comps, provided by brokers, appraisers, and anyone else in the know about a deal. It's based on digital currency—you give comps to get comps. How they make money: selling their market data in total (he says that's already 99% of office deals in Manhattan, their first market that launched a year and a half ago) to landlords, private equity firms, banks for underwriting, etc.
Get A Clue
A lot of you are good at Clue. This time, it wasn't Miss Scarlet in the conservatory with the rope. It was a cleaner with ammonia that mixed with the bleach and did in our poor riddle victim yesterday. It was a tie for first place: congrats to Reed Construction's Steve Sandquist and Ujamaa Construction's Amber Zurcher! Both win a free pass to Bisnow's Schmoozapalooza next Wednesday. And props to Walsh Construction's Patrick Kenny for the most scientific answer, that our victim died from chloramine vapor.