Chicago Multifamily Market: Trends and 2025 Projections

Chicago MultiFamily Market: Trends and 2025 Projections

Chicago’s multifamily market is experiencing significant growth and challenges in 2025. From rising asking rents to shifting vacancy rates, the city’s housing market reflects a complex landscape. Understanding these trends is crucial for investors navigating Chicago’s multifamily real estate opportunities.

Rising Rents and Shifting Vacancy Rates in the Chicago MultiFamily Market

Asking Rents on the Rise

As of November 2024, the average asking rent in Chicago’s multifamily market reached $1,885, an 0.6% increase from the previous month. This represents the eighth consecutive month of rent increases, reflecting strong demand across the city.

Vacancy Rates at a High

Despite climbing rents, vacancy rates in Chicago’s multifamily housing market stand at 5.5%, the highest since 2021.

• Projected Vacancy Rate: Expected to drop slightly to 5.3% by the end of 2024, indicating a potential stabilization.
• Investor Insight: Rising vacancy rates could signal an oversupply issue in certain submarkets, requiring careful analysis.

Economic Context

A housing analyst stated:

“Rising rents highlight demand growth, but wages and employment must keep pace to sustain affordability.”

Chicago’s employment rate declined by 0.1%, contrasting with national growth of 0.2%, creating challenges for the local rental market.

Submarket Insights: Gold Coast’s Role in the MultiFamily Market

Current Inventory and New Units

The Gold Coast submarket remains a focal point in Chicago’s multifamily market:

• Existing Units: 44,562
• Future Supply: 9,347 new units projected for delivery between 2025 and 2026.

Class A vs. Class BC Units

Class A properties command higher rents and maintain lower vacancy rates, while Class BC units face higher vacancy challenges.

• Vacancy Gap: Up to 5.9% between Class A and Class BC units.
• Investor Opportunity: Focusing on Class BC properties in strategic submarkets could yield higher returns with targeted improvements.

Investment Metrics in Chicago’s Multifamily Market

Transaction Volumes and Cap Rates

Chicago’s multifamily market is projected to generate $148 million in transactions in 2025. Notable deals include the $144 million sale of 1326 S Michigan Ave, reflecting strong investor interest.

• 12-Month Rolling Cap Rate: 6.2%, providing a benchmark for returns on investment properties.

“Understanding cap rates is vital for identifying profitable investments,” noted a real estate expert.

Economic and Demographic Trends Shaping Chicago’s Multifamily Market

Income and Employment Challenges

While Chicago’s median household income grew by 0.6%, it lags behind the 3% annual increase in asking rents projected through 2026. This disparity highlights affordability concerns for residents.

• Employment Decline: Chicago’s employment dropped by 0.1%, contrasting with national gains.

Future Projections

With 9,347 new units expected by 2026, the balance between supply and demand will be critical. Rising rents, coupled with increasing vacancy rates, suggest potential oversupply issues in certain areas.

Key Metrics for Chicago’s Multifamily Market

Conclusion: Navigating Chicago’s Multfamily Market in 2025

Chicago’s multifamily market reflects a mix of opportunities and challenges. Rising rents, higher vacancy rates, and significant new inventory require careful navigation. Investors must:

1. Monitor submarket trends, particularly in the Gold Coast and other high-growth areas.
2. Analyze cap rates to identify profitable opportunities.
3. Align investment strategies with shifting economic and demographic dynamics.

By staying informed and adapting to market trends, investors can position themselves for success in Chicago’s evolving multifamily market.

Randolph Taylor

Randolph is a Multifamily Investment Sales Broker with eXp Commercial servicing Multifamily Buyers and Sellers in the Greater Chicago Area.