Joining Curbed today for the third of four "open threads" is Aaron Galvin, managing broker and owner of Luxury Living Chicago Realty and downtown's top rental broker (as recognized by the Chicago Association of Realtors). He's kind enough to have volunteered his time and expertise with the goal of resolving reader questions on the real estate rental market, particularly as it pertains to the luxury segment. As with previous installments, we've gotten the ball rolling for y'all. Here's how the thread works: pose any and all relevant questions to Aaron in the comment section between now and Sunday evening, and he'll have answers for you—also posted below—come Monday afternoon. OK then, lets get 'er rolling...
Curbed: What's the rental business like these days with more people renting for longer, prices climbing relentlessly, and lots of new apartments being built downtown?
The Chicago rental market has been fascinating over the last 18 months. We are already seeing a big change in 2013 from last year. 2012 was the year of shock and awe. Pricing on rental apartments just kept climbing 10, then 15, then 20 percent higher than 2011. Availability was limited because renters were staying put and there was nothing new to move into. It certainly didn't seem like a good time to buy either.
This spring, we are seeing prices holding steady, but not increasing compared to last year. Brand new buildings nicer than anything that's been seen before are opening. Plus the sales market is back. Consumer confidence is up and people feel more comfortable upgrading their housing status.
Downtown Chicago will deliver more than 5200 new residential rental units by the end of 2014. Why so many at the same time? What does it mean for the renter? Several years ago, developers had lots of condos in the pipeline. However, we all know that the housing market went bust and those condo plans were put on hold. Then renting became all the rage and many of those same developers moved forward - only this time they were building multifamily rental buildings in the exact same locations earmarked for condos.
Now we are seeing condo-quality, high-end, amenity driven rental buildings opening in prime downtown locations like the heart of River North and along Lakeshore Drive in Streeterville. The luxury apartment renter has better choices now than someone looking to buy a new condo.
Curbed: How do brokers' commissions typically work with luxury rentals? Is there an accepted percentage? What other fees should the renter watch out for or expect to see?
Renting an apartment with a broker is absolutely free for the customer. You shouldn't pay any extra fees when searching for an apartment with a broker. If a broker is asking you to pay a fee to show you apartments, don't work with them.
Brokers are compensated by the landlord or the management company when their client rents an apartment. A common misconception is that a renter is paying a higher price if they use a broker. This is simply not true. Whether you tour with a broker or on your own, the apartment price is the same. Traditionally, a broker is paid one-month's rent as a commission by the landlord or management company. However, some property management companies are paying a flat fee instead of one month's rent.
Why use a broker? A broker can be an invaluable resource and your advocate when working with a landlord and/or property management company. For example, my agents know how to get certain move-in fees reduced or waived. Plus we have a pulse on availability and pricing to help get you the best values in the properties that are offering the best prices at the time.
Curbed: Your blog, The Luxury Chicago Apartment Update, provides a wealth of "insider information" on downtown pricing trends, building renovations, trends in apartment finishes, and search tips, among other topics. It all seems to be pointing in favor of "luxury". Other than supply and demand, what else is fueling the intense interest in downtown apartment living, as you see it?
The main factor driving downtown apartment demand is corporate relocation and proliferation. Companies, like Google, are moving their headquarters downtown. The hottest tech companies, like Groupon and Belly, are growing. The jobs are downtown. People want to be close to the office and cut commute time. People also want the city at their fingertips and to be a part of the action.
While you can find upgraded units all over the city, the true luxury buildings are right downtown and offer unparalleled amenities and conveniences.
Curbed: Is there an informal pecking order among real estate agents based on whether you peddle rentals or sales? There's certainly a rabid fascination with flashy deals in our culture, but I imagine there's just as much to gawk at the upper end of the rental market.
I've been focused on high-end rentals for ten years. However, I'm the exception, not the rule and my concentration is on true luxury apartments and condos starting at $2000 for one bedroom units and $3000 for two bedroom units.
Until the residential sales market crashed, most brokers wanted to do sales and rentals were an afterthought. Over the last few years, traditional sales agents and brokerages have turned to rentals to maintain business. Many of the luxury sales agents converted to luxury rental agents and now they do both. Rentals are a very different monster than sales. The cycle is shorter, the transaction is faster and the clients move sooner. The rental world is even more fast-paced and many sales agents prefer the slower nature of a sale transaction.
While Michael Jordan is never going to rent his $20 million house, there are some incredible rentals on the market. I've rented a 3,000 square foot unit as high as $14,000. There is currently a rental for $46,000 at the Elysian Residence at the Waldorf Astoria Chicago and many celebrities, such as Vince Vaughn, have listed their units for rent.
·Luxury Living Chicago Realty [Official]
·Curbed University [Curbed Chicago]