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Northgate in Waukegan, a 363-unit luxury apartment complex, is reporting an increase in apartment shoppers. Amenities include a 24-hour fitness center, outdoor pool, tennis court and video library.

Shoppers find deals. Rates steady, inventory higher
Chicago SunTimes; Chicago, Ill.; Mar 14, 2003; Larry Finley, Staff reporter;

Renters looking for a change of scenery this spring will find a lot of choices, leases with very few markups, and even some extras thrown in, such as a free month's rent.

" You won't see any significant rent increases," said Judith Roettig, executive vice
president of the Chicagoland Apartment Association, which represents owners and managers of 120,000 units in the six-county area.

Rents will remain level, just as they did last year, she said, and won't show increases until the economy improves and creates more jobs, possibly in 2004.

" What everyone here is looking for is job growth," Roettig said. "When we see that, it's four to six months before it starts impacting our rental market

" The real estate industry is impacted by the economy, but more than anything, we are being impacted by the low interest rates," Roettig said. "Because of the low interest rates, purchasing still has a very strong appeal."

Chicago is one of the few major cities in the country where the mortgage payment on a firsttime condominium is on a par with the rent for a similar apartment, she said.

" In Boston or Washington or New York or Philadelphia, the purchase price exceeds rents.

You don't have that parity, necessarily, between rents and mortgage," she explained.

But purchasers need to be cautioned that there are additional costs and fees in the buying process, Roettig added. Then, the cost of maintaining the home begins, she said.

Until the market improves, there will be rental concessions, but they will be given on a selective basis, from building to building, and even apartment to apartment, she said.

An apartment owner might offer a free month's rent up front to make a 2-bedroom apartment more appealing, she said. But, if 1-bedrooms are renting well in the same building, there could be no extra incentive for them, she added

The rent reduction is frequently spread out over 12 months, or comes in the form of a reduced security deposit, she said.

The rental market is not just competing with the first-time condo buyers, she added. It is also competing with buyers who purchased units as investments and are now trying to rent them.

What rent increases there are will be about 2 to 4 percent, the same as last year, according to Maurice Ortiz, marketing director for the Apartment People, 3121 N. Broadway, a placement agency.

" This year will be just like last year," Ortiz said. "Property managers will not scare tenants away with any huge rent increases."

Some people are using the rent situation to make a lifestyle change, Ortiz said.

" Because rents are stabilizing or slightly lower, some of the people who couldn't afford to live in Lincoln Park or the Gold Coast can now afford to," he said.

About one-third of the people who come to the apartment-finding service are from out of town, and recently graduated from college or have a job relocation, he said.

The others two-thirds are from the area and want a change of residence, Ortiz added.
One-bedroom apartments are the most sought-after, he said, followed by studios and 2bedrooms. Luxury apartments are in least demand, although some are still needed for executives and professionals here for temporary assignments, he said.

There has been a drop of about 30 percent over last year in the number of apartments needed by companies for new or visiting employees, he said.

Ortiz said he expected business to improve during May, June arid July, the rental market's busiest period.

" The economy is a huge factor. We are in a questionable time right now," he said. "I don't see our inventory changing. It is probably triple what it was in 2000. They keep building condos, and condos keep giving us rental units."

Business is picking up at the big 363-unit Northgate luxury apartment complex in Waukegan, according to Brian Hoffman, vice president of Red Seal Development Corp.

" We are starting to see some traffic again, good qualified traffic," Hoffman said. "Some people are transferring into the area. I think we are seeing the beginning of a change."

Northgate, at 2330 Samson Way, has 1-, 2- and 3-bedroom units. The amenities include a 24hour fitness center, outdoor pool, tennis court and video library. One-bedroom plans rent for $835 to $875, and 2-bedrooms for $975 to $1,050. All of the 3-bedroom plans are rented.

" We have lowered rents slightly to meet the market for the area," he said.
The occupancy rate there is now about 75 percent, Hoffman said, but should get to 93 or 94 percent by this summer

The competition between rental and for-sale condominiums could push some rental building owners into converting to condominiums, according to Gail Lissner, vice president of Appraisal Research Counselors, real estate consultants and analysts.

" Job growth is the key to reviving the rental market," she said.

The latest analysis of 17,000 units concluded that "the rental market 'turned the corner' and that the worst is over."

Reasons for the weak apartment market include the factors cited by others: job transfers and losses, interest-rate-driven condo sales, new rental units and condominiums coming into the market.

The firm also found that between July 1999 and January 2002, corporations and other businesses gave up between 700 and 1,000 apartments they had been leasing.

The occupancy rate for apartment buildings now averages about 90.6 percent, they concluded, and until it reaches about 95 percent, concessions and/or lowered rents will be used.

This year, nearly 5,000 new condominiums and 1,220 rental units will be completed. An unknown factor is how many of the condominiums will be occupied by their new owners and how many will be rented out, adding more apartments to the market.

For example, in January there were at least 726 condominium units for rent in the prime downtown area, including the Loop, Near West, Near South and Near North sides, according to Appraisal Research.