Six Factors That Will Shape Chicago’s Multifamily Market in 2023

­By most measures, Chicago’s multifamily market has emerged from the pandemic stronger than ever, with robust rent growth supported by rising occupancy in both the city and suburbs. Faced with rising interest rates and a declining inventory of for-sale homes, many would-be buyers are continuing to rent. That trend, coupled with a slowdown in unit deliveries, has kept the market tilted in favor of landlords. The question is for how long? While many in the industry are bullish on the market’s performance even as fears of a recession grow, some assets will perform better than others amid inflationary pressures and other economic headwinds that will impact how much renters are willing to — or able to — pay for housing going forward. What follows are six key factors that will shape Chicago’s multifamily market in 2023 and beyond:

Impact of rising interest rates on investment sales velocity — This is the elephant in the room. Interest rate movement has impacted velocity in the near term but improving property performance metrics should help maintain an active marketplace, which saw sales velocity climb to record heights during the first six months of 2022, bolstered by low vacancy in the suburbs and high rent growth and improved conditions in the downtown core. Although fewer deals are being completed as bid-ask spreads widen, there is no shortage of interested buyers in the market, which should bode well when interest rates begin to fall again.