A serious game of one-upmanship is underway in downtown Chicago's rental market, as developers race to open shiny apartment towers tricked out with swank extras and some eye-popping rents.
Have a dog? Drop off your four-legged friend at the in-building spa. Friends coming over to watch the game? Throw a party in one of the gathering areas, outfitted with big-screen TVs, plush furniture, fireplaces and a gourmet kitchen. Working out? After using the fitness center or the golf simulator, wind down in the sauna or steam room.
Despite monthly rents that generally start at around $2,000 for a studio, the resort-style amenities and well-appointed units are attracting tenants and making apartment towers built just a few years ago seem a little less special. Yet there are concerns that the building boom is leading to a market imbalance that will push down rents and potentially trip up developers.
"Demand is not keeping up with supply that is already being delivered," said Ron DeVries, a vice president at Appraisal Research Counselors. "Our occupancy in the market has moved down, and now we're going to be adding another 2,300 units this year plus over 4,000 units next year."
"There's a lot of market tension for a developer to be able to sell what makes their project unique," he added.
Economic as well as demographic trends are fueling apartment construction. Corporations are moving downtown, and young adults, waiting later to have children, are interested in living in cities longer. Downtown Chicago's renaissance of restaurants and entertainment options is creating more options for after-work activities. And consumers either don't want to, or can't afford to, buy a home.
On the business side, planned condominium projects went bust during the housing market's meltdown and have yet to return, but financiers are eager to become equity partners in well-conceived rental projects.
A decade ago, in 2004's first quarter, there were about 17,200 rental units in an area bordered by North Avenue, Cermak Road, Lake Michigan and parts of the Chicago River and Ashland Avenue. By the end of next month, there will be about 26,800 units, a 56 percent increase. In 2015's first quarter, there will be almost 30,000 apartments in that downtown area, estimates Appraisal Research Counselors.
Between 2000 and 2010, Chicago's downtown population increased by 48,000 residents, according to census data.
That confluence of factors continues to attract developers, both those who moved to the sidelines during the housing downturn and those who pushed through it. They are doing infill development, as well as expanding the definition of what was considered desirable downtown living.
"It's harder to find good sites," said developer Steve Fifield, who is juggling several residential projects in Chicago. "Whatever boundaries people perceived 10 to 15 years ago have all been broken. There isn't a red line that says buildings on this block will do great and buildings on this block won't. The next cycle is a cycle of buildings that weren't on people's radar two years ago."
Two years ago, Fifield Cos. started negotiating for a site north of Chicago Avenue, at 347 W. Chestnut St., near Orleans Street. The company hopes to get city approvals to move forward on the project this year and deliver a 31-story, 333-unit apartment tower in 2016.
Meanwhile, architect and developer Thomas Roszak, whose last large project was the South Loop's Vetro condo tower, where the final units were auctioned in 2009, is back with partners and has begun construction on a 15-story, 190-unit rental building at Jefferson Street and Jackson Boulevard in the West Loop. The building, which will be complete in the spring of 2015, will include an "eco-garden," and Roszak promises interior finishes that will rival what's found in the upscale Streeterville developments.
"There are a lot of jobs being created, a lot of tech companies," Roszak said. "These kids, 25- to 39-year-olds, come from these nice dormitories. They do not want to come and live in a three-story walk-up in Wrigleyville anymore. This demographic is a little bit more demanding than 15 years ago."
Closer to the lake, Optima Chicago Center opened in the Streeterville neighborhood only in October, but rentals are running "several months ahead of schedule," so Optima Inc. president David Hovey hopes to start construction this year on a second tower next door. That one, a combination of 365 apartments and 270 hotel rooms, could be ready for move-ins in 2016, Hovey said.
This summer, Related Cos. will open 111 West Wacker Drive, an ultraluxury building that will be similar to its 500 Lake Shore Drive high-rise, where a three-bedroom, 31/2-bath penthouse unit is listed for $15,000 a month. And last week, The John Buck Co. received approval from the Chicago City Council to move forward with a plan to tear down a six-story commercial building at 200 N. Michigan Ave. and replace it with an apartment tower containing more than 400 units.
The floor plans of most buildings now coming to market or in development would allow for the units to be turned into condos in coming years by razing walls and combining units. Inside the units, kitchens and bathrooms feature high-end fixtures and cabinetry.
Developers, somewhat friendly competitors, will often tour one another's projects once completed — some have even been known to take pictures — then tinker with their own buildings still under construction to make them unique.
When the 42-story, 332-unit 73 East Lake opens this spring, potential renters may notice that its kitchen sinks are black, not stainless, and the bathrooms are equipped with dual-flush toilets. The wall behind the public spa area's hot tub has a waterfall. A private dining room that can be reserved in the common area will have marble walls.
M&R Development didn't have to tap a construction contingency fund, so it channeled some of that money toward interior finishes. "We spent more than we thought," said Anthony Rossi, M&R president. "You're just trying to do a few things that are different. It's brutal. People have done some really nice stuff."