The latest report from Marcus & Millichap calls for a strong 2025 in Chicago's multifamily sector. The CRE firm expects rents this year to grow by 4.2 percent to an average of $2,137 per month.
Also, vacancy is set to fall by 20 basis points.
"Already below-average vacancy further constricted in the latter part of 2024," Marcus wrote.
"This trend will persist into the coming year as a slowdown in construction pushes vacancy down to 4.5 percent."
Completions are projected to be 4,300 units, which would mark the lowest total a year since 2015. That comes after 2024 saw the lowest construction starts in a decade.
"Supply remains particularly tight in the Hyde Park-South Shore area and in the north side neighborhoods from Uptown north to Evanston, where vacancies decreased in 2024," Marcus highlighted.
While institutional investors have shown mostly interest in Class A multifamily assets in Chicago, increasing real estate taxes and stagnant household growth could shift the focus more toward lower-quality assets. In fact, Class C types are standing out, with rent growth exceeding five percent in 2024 — which outpaces all property classes in the multifamily sector.
"This strong rent growth suggests attractive cash flow for investors focused on workforce housing or value-add opportunities," Marcus said.
The California-based company listed 2024 low vacancy areas like South Shore and Rogers Park, as places that institutional investors could target this year.
Another headwind, along with higher taxes and limited population growth is that job gains are expected to slow to 0.4 percent in 2025. That's 20 basis points behind the metro's long-term average of 0.6 percent. However, Marcus thinks that Chicago's investment in public transportation will make the metro attractive for residents, which might be able to outweigh some of the economic concerns.