Following a national trend
, Chicago doesn’t have enough housing. Household growth in Chicago greatly outpaced new housing starts from 2011-13, and while the apartment development surge helps to cut into this disparity, household growth still exceeds new housing starts thus far in 2016. In fact, if not for a slowdown in household growth, new housing starts would equate to merely half of household growth from 2014-16.
We’ve pointed out before that, due to factors such as Millennials moving to the suburbs, many downtown areas of major metros may be in serious risk of oversupply
. While Chicago hasn’t hit that point yet, the possibility looms: nearly 6,000 units are under construction downtown, close to double the units of Chicago’s next most construction-heavy submarket, North Lakefront.
Student demand could be key in insulating downtown developers from an oversupply problem. Chicago’s Loop houses many Colleges & Universities including Robert Morris, Roosevelt University, Columbia College Chicago and several of DePaul University’s Schools. Those four schools enroll over 20,000 students in their Downtown locations. However, housing options are limited—all four schools primarily rely on an 18-story apartment called University Center for student housing, which only houses 1,700 students.
In response, developers are building market-rate apartments that contain amenities which appeal to the student lifestyle. For instance, Chicago-based CA Ventures recently completed two apartment projects, Infinite Chicago and Arc at Old Colony. Both are upscale, furnished housing that cater to students. The apartments have amenities including wall-mounted HDTVs, in-unit washer/dryers, and rooms for studying.
When we compared student supply and demand to regular supply and demand, student housing is more scarce. To do this, we analyzed leasing velocity for each of CA’s two Downtown projects. Infinite Chicago reached stabilization faster than the Downtown average leasing period by four months. While the Arc at Old Colony remains 20% vacant one-year after opening, it competes with Infinite Chicago. Should the Arc continue its recent 5% per month leasing pace, the community will stabilize in a total of 14 months, which is close to the market average.