Multifamily Investment Volume Up in Chicago as Rents Push Higher

The Chicago multifamily market remained healthy during the first quarter as deliveries slowed. Asking rents continued to rise, building on larger increases in prior periods, bringing year-over-year rent growth in line with long-term averages. While vacancy rates did not improve alongside rents during the first quarter, they stabilized after inching higher throughout 2024. The market’s performance is being buoyed by continued renter demand and a slowdown in construction. In recent years, new supply has outpaced demand, leading to rising vacancies and slower rent growth. The addition of fewer than 1,500 units so far this year is nearly 20% lower than recent averages. This trend was especially noticeable in the Glenview/Evanston submarket, where limited deliveries over the past year and steady demand caused vacancies to tighten and rents to rise.

The Chicago multifamily investment market is gaining momentum, supported by operating fundamentals that are attracting a growing pool of investors. Following limited activity in the first half of 2024, transaction volume has accelerated. First-quarter sales this year more than doubled compared to the same period in 2024, signaling renewed investor confidence. Activity has been evenly distributed property classes, underscoring broad-based demand across the quality spectrum. Class A prices have surged, with the median price rising to $421,500 per unit, up 33% from the 2022-2024 average. While prices have spiked in the Class A segment, the median price across all property sales has crept lower, as a wider mix of properties have traded in recent months. The Downtown and North Lakefront submarkets have led activity so far in 2025, each accounting for 17% of total sales.

Looking ahead

Existing trends in the Chicago multifamily market are expected to continue through 2025, with vacancy remaining in the low 5% range and rent growth maintaining a similar growth pace. Inventory growth is projected to slow from recent highs, with about 4,700 units scheduled for completion in 2025. Last year, net move-ins were roughly 5,100 units and the 2025 total is likely to be near that, supporting stable occupancy and continued rent growth. Submarkets in and around Downtown Chicago are expected to perform well in the coming quarters. Areas such as The Loop, South Loop, Gold Coast, City West, Rogers Park, and Lincoln Park combined to total net absorption of approximately 2,300 units during the past 12 months. These submarkets are projected to gain only about 500 units of new inventory in 2025.

With asking rents and vacancy conditions both forecasted to perform well in the coming year, transaction activity in Chicago is expected to outpace last year’s totals. The cooling construction levels driving many of these improvements may also directly impact the investment market, as investors gain a clearer view of operating conditions. Class B assets have made up 33% of sales this year, down from an average closer to 50% since 2016. While the Downtown and North Shore submarkets comprised the largest share of sales both this year and in 2024, the bulk of properties publicly listed for sale are in the South and Southwest Chicago submarkets, which are likely to see much of the market activity for the remainder of the year.

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