Midwest

Modest economic growth in the Chicago metro area will support further improvements in apartment vacancy and rents this year. Staffing levels grew in the first half of 2013, though the pace of hiring eased from prior periods. Vacancy will remain lower than normal in the near term, though temporary imbalances between supply and demand will occur over the next two years. This trend is especially likely in the city, where the number of new luxury units aimed at upwardly mobile young households and affluent older households is increasing. New sources of demand, however, will also emerge, including echo boomer and new immigrant households. Properties listed for sale typically elicit multiple offers, placing upward pressure on prices and compressing cap rates. Northside neighborhoods remain a targeted area, and the best assets in those submarkets can trade at cap rates from 5 to 6 percent. Investors continue to look for underperforming assets and are giving greater consideration to eventual exit strategies. Interest in Class C and Class D assets in blue-collar neighborhoods on the west side and south side is also gaining traction. Recent transactions have established $30,000 per unit to $35,000 per unit as the strike point to execute deals, and …