With a diversified portfolio of Class A multifamily across 10 downtown Chicago neighborhoods, Luxury Living Chicago Realty (LLCR) is uniquely positioned to provide valuable data on how leasing has been impacted by the COVID-19 crisis. In comparing year-over-year leasing data from the same 11-week period from mid-March to the end of May, the results yield a surprisingly positive outcome, resulting in 88% of year-over-year leasing velocity. Further analysis examines showings, pricing, and demographics in addition to how the pandemic is impacting leasing and the long term health of Chicago Class A multifamily.  

Showings

During the equivalent 11-week period in 2019, LLCR conducted 1,546 apartment showings. In the same period in 2020, LLCR conducted 1,353 showings (87.5%). Of the 1,353 showings, 1,236 were conducted virtually, where a renter never physically saw the apartment they were considering renting. Leasing agents often conducted video chats and screen sharing which included pre-recorded virtual walkthrough videos of model apartments, amenities and floor plans.

“Once talks of a citywide stay at home order began, we knew we had to prepare our business to continue leasing virtually,” said Aaron Galvin, CEO of Luxury Living Chicago Realty. “Last year, we leased about 5% of our 3,000 apartments “sight unseen” so we had a headstart in knowing what renters needed to feel comfortable leasing through a virtual experience. That meant gathering all of the right assets, extensive training for our team and updated messaging for customers to know we were ready for them virtually. We could not be happier with the results based on current market conditions.”

One data point that has shifted from the prior year is the amount of time it takes for a renter to submit an application from the date they first toured an apartment. In the 2019 period, the average time from showing to the application was 3.9 days. In the same period in 2020 that timeframe increased to 8.8 days. 

“The hesitancy in submitting an application was expected given the current environment. The most impactful factors were job security, clarity on rules for moving during the stay at home order and fewer barriers to touring more apartments,” said Galvin. “Since renters were working from home, they had much more time to explore more properties virtually. We have always seen renters considering multiple neighborhoods but the sheer number of virtual tours most renters had before deciding on an apartment increased substantially.”

Ultimately, with over 300 new leases secured during this 11-week period, application to showing ratios remained consistent at just over 24% of showings resulting in secured leases. 


Pricing

When analyzing the spring market in Chicago, mid-March through May is often the busiest time for lease expirations and new apartment leasing. In turn, this is also the period where rents increase the most. During a normal spring leasing cycle, LLCR will often see available apartment pricing increase by as much as 15-20% during this period of time. This has not been the case in 2020. 

Renewal pricing on apartments with lease expirations from April through July has remained flat. New unit market rate pricing in the LLCR portfolio has dropped from an average of $3.40 PSF in 2019 to $3.25 in 2020 (a 4.6% decrease). Another data point to consider is the average rent. The 2019 average rent was $2,943 per month as compared to $2,572 in 2020. This decrease is attributed to both the market rent decreases combined with significantly less two-bedroom rentals in the portfolio. 

“The overall reduction in rents is not only about lowered rents and increased concessions, but also about the types of units that are being rented,” said Mark Ziemke, Director of Leasing Strategy. “Our portfolio saw a dramatic decrease in premium two-bedroom rentals this year over last and far less couples and roommates securing new rentals. Even with people working from home, most are opting for smaller unit size apartments.”  

When comparing couples versus single renters, couples accounted for 65% of all leases during this period in 2019. In 2020, couples only rented 49% of the apartments, a 16% decrease. This also contributes to lower rent levels, as couples tend to have more buying power. 

Relocations

Nearly 40% of Class A renters in downtown Chicago are relocation renters. This is where the current environment has hurt the market the most. As a percentage of total renters year over year, the number of leases attributed to relocations has dropped by 22%. This has hurt velocity, absorption, and rent prices. 

“The greatest demographic change we saw from last year to this year is a decline in relocation clients moving here for new jobs,” said Ziemke. “Historically, renters who are relocating tend to be slightly older and have higher incomes along with more disposable income, which is a key factor in being comfortable spending more on rent.” 

The top five states driving relocation in 2019 were California, New York, Texas, Michigan, and Indiana. These five states saw a 53% decline in relocations to Chicago during the measured 11-week period.  

“The open question as we look toward the second half of the year is if relocation traffic is going to come back,” said Galvin. “People who live in Chicago have been more willing to move because they have spent exponentially more time in their apartment than ever anticipated. As offices start to re-open and we ramp up for 2021, we expect relocations and leasing velocity to increase as compared to traditional 3rd and 4th quarters of the past.”