Year-to-date multifamily deliveries fall to decade low in Chicago

Movement in Chicago multifamily operating conditions slowed to a near halt in the third quarter. The market has entered an equilibrium, with both year-to-date deliveries and absorption levels reaching decade lows simultaneously as rents and vacancy remain effectively unchanged. Despite this overall stability in the market, individual submarkets are posting varied performances. The Elgin/Dundee area, which typically represents only a small share of total construction, contains the greatest number of new units delivered so far this year, totaling more than 600 units. The neighboring Schaumburg/Hoffman submarket recorded some of the strongest rent growth in the metro, rising 7.5% over the past 12 months. While overall vacancy rates are flat, the Rogers Park/Edgewater and Belmont to Montrose submarkets posted vacancy improvements of 60 to 70 basis points over the past year after weaker performance in prior periods.

Multifamily investment activity in Chicago remains elevated compared with recent years, while still well below the peak volumes recorded in 2021 and 2022. Per-unit pricing has remained within a tight range, even as the mix of properties that changed hands includes more lower-tier assets than in 2024. Class A assets are currently trading at peak pricing with a median of $421,500 per unit, up 45% from last year and 20% above the previous peak in 2022. Class B assets followed a similar trajectory, rising 23% from 2024 levels to a new peak median sale price of $245,200 per unit. One factor influencing pricing trends in 2025 has been the location of sold assets. Downtown Chicago has accounted for the majority of transactions this year, with pricing up 30% from 2024.

Looking ahead

Operating conditions in Chicago are expected to shift modestly in the fourth quarter and remain relatively stable through the end of the year. The vacancy rate is projected to tick lower but is likely to remain within the high-4% to low-5% range throughout this year and into 2026. Rents are expected to advance, continuing a trend that has been in place in recent years as the local economy has improved. Average annual rent growth for 2025 and 2026 will likely be in line with recent gains. One factor that has supported property fundamentals has been a limited number of new units entering the market. While construction activity may pick up next year following a cyclical low in 2025, the pace of deliveries is expected to be more moderate than the highs that were recorded throughout the late-2010s and early-2020s.

The number of properties that change hands in Chicago during the fourth quarter is expected to be consistent with recent quarters, though full-year sales in 2026 are likely to accelerate. An anticipated improvement in operating conditions in 2026 could drive investor interest. Of the properties that are publicly listed for sale, the majority are in Downtown Chicago, which will likely continue to lead the metro in the number of closed transactions. More than half of all publicly listed properties are also Class A assets, a factor that should shift the transaction mix. Cap rates are not expected to move significantly in the coming months, though an increase in Class A properties changing hands could modestly push the average cap rate slightly lower.

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