S U B M A R K E T R E P O R T

Southwest Cook County Submarket, Chicago MSA First Quarter 2008

SUBMARKET MAP SUBMARKET FACTS

Submarket Metro


43


88


294



55 

90
Population 1,213,510 9,573,949


34

Avg. Annual Five-Year Chg.* -0.2% 0.6%



41

Total Households 408,404 3,375,144



355


294 

90



12 Avg. Annual Five-Year HH Chg.* -0.3% 0.4%
Southwest
Southwest
Median Household Income $53,624 $63,393
Cook
Cook County
County 

1



94
Median Age 36.2 35.5


45


57
Employment 394,934 4,656,565


83


 6
Vacancy Rate (4Q 07) 5.6% 4.8%


80
Avg. Asking Rent (4Q 07) $838 $1,046


80

* 2007-2012 Forecast

SUBMARKET VACANCY RANKING SUBMARKET HIGHLIGHTS

4Q 07 4Q 07 Southwest Cook County remains one of the most
Submarket Vacancy Asking Rents active investment submarkets in the Chicago metro.
Healthy fundamentals, such as average rent growth
Lincoln Park 2.0% $1,240
above 2.5 percent and fairly stable occupancy rates over
Belmont to Montrose 2.7% $1,192 the last two years, are attracting strong investor
demand from predominantly local buyers, a trend that
Southeast Cook County 3.3% $816 is expected to continue. The majority of assets in the
area are stabilized properties that will not require sig-
Joliet 3.8% $820 nificant capital improvements. Furthermore, the premi-
ums paid by condo converters in the past have been
Kane County 4.4% $957 eliminated, as these investors have left the market,
allowing valuations to settle at sustainable levels.
Glendale Heights/Lombard 4.8% $1,075 The submarket contains a large inventory of apart-
ment product, although there has been no supply
Oak Park 5.0% $959 growth in the last five years. Despite a moderate rise in
vacancy over the past year, relatively strong demand
Southwest Cook County 5.6% $838 for rental housing has enabled owners to implement
healthy rent increases and boost revenue by 2.3 percent.
The Loop 5.8% $1,732 Vacancy is forecast to tighten in 2008 as demand for sin-
gle-family housing shifts toward the rental market as a
City West 6.4% $953
result of stricter lending standards and a growing num-
ber of foreclosures. The deepening renter pool will also
help to lower the cost of turning apartments, because
units will be vacated for a shorter period of time.

Chris Best © Marcus & Millichap 2008

Research Associate www.MarcusMillichap.com
Southwest Cook County Submarket, Chicago MSA Apartment Submarket Report ◆ First Quarter 2008

Construction Trends* CONSTRUCTION TRENDS

1,200
◆ Market-rate apartment construction in the Southwest Cook County
submarket has been constrained over the last five years, with no
1,000
additions to inventory during that time. Elevated costs of construc-
Units Completed

tion have deterred many developers from building in the area.

800
◆ Developers have focused on for-sale, seniors and subsidized
600 housing in the area. Approximately 1,090 condominiums and sen-
iors housing units are expected to come online in 2008, exceeding
400 last year’s addition of 618 units.
04 05 06 07 08**
* Includes condominiums, townhomes and seniors housing ** Forecast
Sources: Marcus & Millichap Research Services, Reis, TWR ◆ Condominium and townhome construction has accounted for 61
percent of all multi-family deliveries in the last year, as these for-
sale product types serve as an attractive equity alternative to high
prices in the single-family sector. The largest under way project is
Bridgeview Place, which is scheduled to bring 300 townhome
units to the submarket by the fourth quarter of 2008.

RENT AND VACANCY TRENDS

Asking Rent and Vacancy Trends ◆ Last year, vacancy in Southwest Cook County rose 50 basis points
$900 Average Asking Rent 8%
Vacancy to 5.6 percent, though the rate has remained unchanged in the
Average Asking Rent per Month

past six months. Vacancy is forecast to improve 10 basis points in

$850 7% 2008 as owners forego significant rent gains.
Vacancy Rate

$800 6% ◆ The average asking rent increased 2.4 percent to $838 per month
in 2007, while effective rents advanced 2.8 percent to $797 per
$750 5% month. A surplus of available apartment housing in the submar-
ket has caused owners to be competitive with rents.
$700 4%
04 05 06 07 08*
* Forecast ◆ Asking and effective rent growth in 2008 will slow to 2 percent, or
Sources: Marcus & Millichap Research Services, Reis
$855 per month and $813 per month, respectively. After three con-
secutive years of concession burnoff, effective rents are expected
to fall in line with asking rent growth, which should attract ten-
ants that have either left the housing market or are new residents
to the area.

SALES TRENDS
Sales Trends ◆ Transaction velocity in the submarket has slowed by 44 percent
since 2006, returning to a more sustainable pace. The deceleration
Median Price per Unit (thousands)

$70
can be attributed to a tight credit market and the exit of conver-
sion buyers.
$60

$50
◆ The median sales price settled to $53,146 per unit in 2007, as a
greater number of apartment operators reentered the market after
$40
several years of condo converters inflating the price of units. The
decrease in the median sales price is representative of investments
$30
for income rather than conversion potential.
03 04 05 06 07*
* Estimate
Sources: Marcus & Millichap Research Services, CoStar Group, Inc. ◆ Cap rates have increased to the mid- to high-8 percent range dur-
ing the last 12 months, as many sellers have realigned their expec-
tations and lowered prices.

Chris Best © Marcus & Millichap 2008

Research Associate www.MarcusMillichap.com
Sources: Marcus & Millichap Research Services, BOC, CoStar Group Inc., RCA, Reis, SRC, TWR
The information contained herein was obtained from sources deemed reliable. Every effort was made to obtain complete and accurate information; however, no representation, warranty or guarantee to the accuracy, express or implied, is made.