2018 CAR Market Outlook Gail Lissner

Integra Realty Resources Inc. www.irr.com


State of the Chicago Residential Market

January 2018

Integra Realty Resources (IRR) – Chicago

Gail Lissner, CRE, SRA

Integra Realty Resources - Chicago

400 East Randolph, Suite 715

Chicago, IL 60601


“After nearly 50 years, property consulting

firm enters new era” Crain’s Chicago Business 10/09/17

Integra Realty Resources (IRR) – ChicagoFormerly Appraisal Research Counselors


Homeownership Trends

Chicago is at 64.7% as of 3Q17

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Chicago National


2007-2017Avg Sales Price Trends – Chicago MSA

Source: MRED LLC Compiled by Integra Realty Resources - Chicago


2007-2017Avg Sales Price Change – Chicago MSA

Source: MRED LLC Compiled by Integra Realty Resources - Chicago


IRR 65-Building Downtown Chicago Sales Price Trends (PSF)

2007-2017

Survey of Closed Sales Price Trends in

65 Buildings with 20,000+ Units

• Up $100 PSF from bottom of mkt

(+30%)

• Up $28 PSF from 2007 (+7%)

But – individual buildings had very different

results!

Source: MRED LLC/ Integra Realty Resources - Chicago


Submarkets of Downtown Chicago

North of the River:

Gold Coast

Streeterville

River North

South of the River:

Loop

West Loop

South Loop

125,000+ units


Downtown Chicago Residential Market

New Unit Deliveries: 1995-2019 projected

Annual Deliveries –

averaging 3,245

units with

47% rental units &

53% for-sale units

Rentals – dominated

since 2010


Downtown Chicago Unit Deliveries


Downtown Rental Deliveries - % of Total Deliveries


Challenges of For-Sale Development Downtown

Post-recession development:

• Land seller expectations

• ARO requirements

• Construction costs

• Pre-sale and equity requirements

• Delays and uncertainty of new construction

• (buyers want it “today”)

• Slow condo price growth

• Investors no longer fueling demand

Rental deals are easier to get done!


Downtown Units Delivered Since 2004 –

Resale Price Trends

Resale market

provides lower cost

alternatives PSF but…

Source: MRED LLC/Integra Realty Resources - Chicago


Downtown Unsold Developer Condo Inventory

Below

1,000 units

since 2013


Downtown Unsold Developer Condo Inventory


Downtown Unsold Developer Condo/TH Inventory

Targeting the luxury

segment of the market –

89% over $700 PSF and

large unit sizes


Downtown Unsold Developer Condo/TH Inventory

Challenges – selling

future occupancy

dates


61 W. Erie

900 West Washington The Hayden

360 West ErieThe Bentham

Boutique Bldgs:

$690-$900+ PSF

2,100-3,400 SF

10-38 units

New Condo Projects – Started Marketing in 2017

1000 S. Michigan-325 units

Superior House


And some buildings converting back to rentals!

Characteristics of De-conversion candidates:

• Large percentage of investor-owners

• Small unit sizes (i.e. studios/1BRs)

• Lack of price appreciation – sales lagging the market

• Renovation work needed (special assessments looming)

• Location in an area of strong rental demand

• Potential as a development site


Where is the Condo Market Headed in 2018?

Smaller-sized developments with few exceptions

• Easier to finance

• Absorption/sell-out more manageable

Larger-sized units with few exceptions

Higher priced points due to feasibility

Pricing will continue to trend upward modestly

Great opportunities - Strong pent-up demand for mid-priced new units and townhomes

Continued de-conversions of modest condo buildings

2018 CAR Market Outlook Gail Lissner

Real Estate

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