Chicago Apartment Report 2004 In-Town Chicago Registers Apartment Occupancy Premium Following a trend seen in several downtown neighborhoods across the country, Chicago's Intown submarket recorded a September apartment occupancy rate (93.6 percent) notably higher than the metro norm (92.2 percent). After dipping to a recent low in late 2002, occupancy has been firming a bit in this Intown area, which includes a number of desirable neighborhoods such as Lakeview, Lincoln Park, North Side, Near North Side, Old Town, Gold Coast, River North, Streeterville, the Loop and South Loop. Occupancy inched up one-tenth of a point during the past year in this large submarket, where more than 1,500 units were absorbed. Further illustrating Intown's recent success, occupancy in communities built during the 1990s or later registered at 94.6 percent, up 3.3 points since June and 3 points above the September 2002 level. Substantial recent apartment demand across Intown Chicago is notable for several reasons. First of all, the area has been besieged by a wave of new condominium units. Driving around the greater downtown area, it's tough to travel more than four blocks without seeing a newly completed condo project (such as the 52-story, 810-unit One Superior Place in the Near North area), a high-rise in some form of construction (the 30-story Lancaster in the Loop's Lakeshore East development) and/or a sign heralding future construction (the Palmolive Building at the northern end of the Magnificent Mile). Though sales have slowed from the previous red-hot pace seen a few years ago, low interest rates continue to lure a meaningful block of renters to the for-sale sector. Second of all, despite the active condominium market, apartment building has remained comparatively active in downtown Chicago. The Intown area witnessed the addition of two properties totaling 1,244 units in year-ending September 2003, ranking the neighborhood as the Chicago area's most active apartment construction submarket. The larger of these two developments is Near North Properties' Grand Plaza Towers, which occupies the entire block bordered by Grand Avenue, Ohio Street, State Street and Dearborn Street. Located in the River North neighborhood, this massive, two-tower project consists of 764 apartments as well as 100,000 square feet of retail space (including a Jewel/Osco and a Bed Bath & Beyond) and a 1,000-car parking garage. Just a few miles southeast sits Archstone-Smith's newest Chicago venture: Park Millennium. This ultra-luxury 52-story, 480-unit apartment building, which is situated on Columbus Drive just south of the Chicago River, offers hotel-like amenities such as room service, maid service, dry cleaning, personal shoppers and personal trainers. The new Millennium Park, a recent northern extension of the city's famed Grant Park, is another nearby amenity that boasts the Music and Dance Theater, the Gehry Bandshell and the McCormick Tribune Ice Rink. Construction on the final units in both the Grand Plaza and the Park Millennium apartment communities wrapped up in December 2002. And finally, steep rental rates in Chicago's Intown neighborhood tend to exclude a sizable chunk of renter prospects. Intown rents are far and away the most expensive in the metro Chicago area, averaging $1,204 per month, or $1.579/sq ft, in September 2003. And despite a considerable cut in rates (6 percent since 3rd quarter 2002), apartment residents in this submarket pay rental rates roughly 26 percent higher than the metro norm ($959). These high average rents not only reflect a locational premium and the uniformly upscale character of the development in this sector but also are influenced by a greater concentration of high-rise apartment buildings that are predominant in the area. High-rise properties comprise approximately 93 percent of M/PF's 3rd quarter survey sample in the greater downtown Chicago area. Though condominium construction activity has shown little sign of respite, and another 452 apartments are about to enter the market, Chicago's Intown rental sector appears likely to sustain its occupancy premium over the suburban performance. Returning job growth, meaningful rent concessions and a general interest in downtown living will likely facilitate notable demand. Thus, forecast occupancy in this submarket holds at 93.6 percent through fall 2004, once again ranking the area among Chicago's tightest neighborhoods.