Experts Advocate "Block-by-Block" Pricing Strategy
Multifamily market analysts are advising operators to adopt hyper-local pricing tactics instead of relying on citywide trends. According to recent podcast discussions, the highest returns are going to properties that analyze "block-by-block pricing differentials," particularly near major luxury anchors like the Waldorf Astoria or Park Hyatt.
- The "block-by-block" approach is crucial in a market like Chicago where neighborhood characteristics heavily influence rental performance; factors like transit access, proximity to employers and universities, and local retail corridors directly impact absorption and rent growth. - Chicago's multifamily market is experiencing robust health, with a low vacancy rate of 4.7% and a forecasted effective rent growth of 5.3% for 2025. This strong performance is partly due to a significant slowdown in new construction, with completions expected to be just 0.6% of the total housing stock. - In downtown Chicago, the luxury market commands significantly higher rents, with an average of $3,029 per unit, or $3.77 per square foot, reflecting a 5.1% year-over-year increase. This contrasts with the broader metro average asking rent of $1,888 per month. - The peak leasing season, running from March through September, sees the highest demand, allowing for faster lease-ups and optimal rental rates. Conversely, the slower winter season from October to February may necessitate concessions to attract tenants. - Competitors in the Gold Coast luxury segment focus on high-end amenities, including 24-hour door staff, valet services, rooftop lounges with pools, and state-of-the-art fitness centers with features like Peloton bikes. Tech-enhanced security and pet-focused amenities like spas and dog runs are also becoming standard. - Research indicates that the construction of new luxury apartments can lead to a "filtering" effect, where wealthier tenants move into new units, increasing vacancies in older buildings and subsequently causing rents to decrease by 5 to 7 percent in the immediate vicinity. - Golub & Company is an active participant in the Gold Coast market, managing and leasing properties such as Two West Delaware and Chestnut Place, and has a history of joint ventures in the area. - The Gold Coast/Old Town/Near North submarket has a significant pipeline of proposed new units, with 3,576 in development, second only to the West Loop/Fulton Market area. This indicates future supply increases that will impact the competitive landscape.
