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90
Population 1,040,910 9,573,949
Lake
Lake
Michigan
Michigan Avg. Annual Five-Year Chg.* 0.0% 0.6%
City
City Median Household Income $45,266 $63,393
West
West
Median Age 31.2 35.5
41
290
Employment 395,494 4,656,565
600 ies mark the largest amount of completions received in the last seven
years. The biggest complex to come online was the 422-unit Grand
400 Kingsbury at N. Kingsbury Street and W. Illinois Street in Chicago.
200
◆ Two projects currently under way and are scheduled for completion
in 2008 are expected to add over 400 units to the submarket’s inven-
0
tory. Allure at K Station, slated for delivery in the fourth quarter of
03 04 05 06 07* 2008, will bring 350 units to the area.
* Forecast
Sources: Marcus & Millichap Research Services, Reis, TWR
◆ The pace of construction is forecast to remain swift going forward,
with four projects in the pipeline. If all are completed, more than 550
units will be added to the market. Developers are favoring mixed-use
developments, as three of the planned projects are expected to
include an aggregate of more than 16,000 square feet of retail space.
in the high-7 percent to low-8 percent range over the next 24 months,
$950 7% as developers continue to add new units to the submarket’s inventory.
Vacancy Rate
$900 6%
◆ In an attempt to curb rising vacancy, owners slowed the pace of ask-
ing rent growth in 2007. The first quarter of 2007 posted a negative
$850 growth rate of 0.6 percent. This downward trend reversed in the sec-
5%
ond half of 2007 and is forecast to end 2007 at $975 per month, a 4.8
$800
percent uptick over year-end 2006.
4%
03 04 05 06 07*
* 3Q 2007
Sources: Marcus & Millichap Research Services, Reis
◆ Despite sluggish asking rent growth, owners have been able to keep
concessions low, as effective rents have outpaced asking rents for five
out of the last seven quarters. The average effective rent in the third
quarter of this year was $922 per month, a 5.1 percent increase over
the same period in 2006. Effective rent growth is projected to modest-
ly outpace asking rent growth over the next 24 months, as competi-
tion from new developments will keep concessions relatively stable.
SALES TRENDS
Sales Trends ◆ Due to tightening lender guidelines and current economic conditions,
Median Price per Unit (thousands)
$120 sales velocity slowed 70 percent in 2007, following four years of con-
sistency. Owners have been reluctant to bring their properties to mar-
$100 ket, waiting, instead, for the market to settle.
$80 ◆ The median price has dropped approximately 11 percent to $89,110 per
unit over the last 12 months. The decline is attributed to a decelerating
$60 velocity and greater amount of lower-tiered offerings on the market,
compared to the last two years. Approximately 45 percent of transac-
$40 tions in 2007 sold for less than $90,000 per unit, while fewer than 30 per-
03 04 05 06 07* cent of transactions in 2005 and 2006 sold for under $90,000 per unit.
* Trailing 12 Months Ended September 30
Sources: Marcus & Millichap Research Services, CoStar Group, Inc.
◆ Cap rates have been compressing over the last five years. Rates have
fallen approximately 50 basis points in 2007 to the low-6 percent range.
Assets that are not properly priced at the beginning of the marketing
period often receive little interest from investors, thereby running the
risk of chasing the market down over an extended period of time.