Rhea Stephen's commercial outlook for the 2023 Market Outlook event.

1. Chicago State of the Multifamily Market
2022 Q3/Q4, CAR
Rhea Stephen, Senior Director Market Analytics
rstephen@costar.com
312.283.0196

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4. Multifamily
Demographic & Economic Drivers

5. Economy Is Cooling
► Inflation affecting all asset type sales
► Federal Reserve is engaged in aggressive monetary tightening, to the tune of 425 bps in
2022.
► Tight labor markets may not be enough to save the economy from recession
► Housing market is cooling as eroding affordability weighs on demand
► Housing costs and rental rates are trending lower, or at least not rising as quickly.

6. Chicago: Job Growth By Sector
Source: Oxford Economics End of 22Q4
2.9%
2.1%
-1.3%
3.1%
6.1%
0.1%
2.3%
10.8%
2.5% 2.2%
3.2%
(2%)
3%
8%
13%
18%
Job
Growth
Average Annual Employment Growth (5 Years) Employment Growth (Y/Y)

7. U.S.B.L.S. & Placer.ai – Tell Seemingly Dissimilar Stories.
They Are Not.
Conclusions:
• Illinois’ population undercounted by the US Census Bureau (1.97%).
• Illinois’ population grew by 1.02% or 250,000 residents from 2010 to 2020.
• Illinois restored as fifth largest state.
• Countywide data still not available.
• Chicago lost around 2.3% of its population from 2018 thru January 2022.

8. Strengths & Weaknesses
Infrastructure, Capital & Talent Pool
• Passenger and transmodal nodes in place:
“L” & Metra, waterways, two international airports and freight hub.
Centralized location and unparalleled rail and highway connectivity as the only U.S. city to contain six Class 1
railroads
• Best in Class Infrastructure – power grid, utilities and broadband. Rebuild Illinois (2019) $45B State Funds +
Infrastructure Investment & Job Act (2021) $18B Federal Funds.
• Access to Capital.
• Diverse economy – largest economic sector is financial with a 19% share.
• Midwest draw for recent college graduates. Hundreds of area colleges and universities.
• Little to no natural disasters! Fresh Water!
• Crime, Taxes and Outmigration – Uncertainty Looms
• Coming to the Office? Sources vary between 40% - 70%. My hunch: Suburbs 80% back; CBD 70%.
• Mayor Lightfoot’s $1.7B Tax Levy passed; yet Cook County Assessor Kaegi’s CRE tax assessment system still not
ironed out.
• Major corporations leaving Chicagoland for no income tax states, lower crime.

9. Multifamily

10. Sources: CoStar and World Business Chicago
Market Report Analytic Filters & Chicago Metropolitan Statistical Area (MSA)

11. U.S. Changes in Household Composition/Living Arrangements
Source: Board of Governors of the Federal Reserve System, May 6, 2022

12. 2019 Apartment Households by Type
Source: US Census

13. Commute Areas
Source: INRIX

14. Apartment Inventory: Units Built by Decade
Source: CoStar End of 22Q4
30%
4%
11%
19%
9%
5%
5%
12%
5%
Pre-1950
1950's
1960's
1970's
1980's
1990's
2000's
2010's
2020's-Present
Chicago
9% 3%
11%
27%
18%
12%
10%
7%
3%
United States

15. Multifamily
New Deliveries & Under Construction

16. Net Deliveries As Share of Inventory
6.4
18.7
2.2
4.9
23.7
4.2
11.3
8.9
7.5
3.8
13.9
7.1
7.8
8.8
5.1
13.0
4.8
6.3
8.8
15.9
0% 2% 4% 6% 8%
Boston
Houston
Omaha
Kansas City
Dallas-Fort Worth
Saint Louis
Seattle
Denver
Charlotte
Richmond
Phoenix
Miami
Orlando
Tampa
Raleigh
Minneapolis
Salt Lake City
Jacksonville
Nashville
Austin
Share of Inventory
Net Deliveries (Last 4 Quarters)
Note: Includes markets with 75,000+ units inventory. Labels
show Net Deliveries in Thousand Units.
1.3
1.7
2.1
1.4
1.4
9.3
0.9
0.9
2.0
1.1
6.6
1.3
1.7
1.9
1.8
3.6
1.4
2.9
4.5
2.6
0% 2% 4% 6% 8%
Baltimore
Detroit
Orange County
Inland Empire
Indianapolis
Los Angeles
Oklahoma City
Tucson
San Francisco
Memphis
Chicago
Pittsburgh
Cleveland
Sacramento
Norfolk
Portland
Louisville
Las Vegas
San Diego
San Jose
Share of Inventory
Net Deliveries (Last 4 Quarters)

17. Units Under Construction As Share of Inventory
12.9
35.7
6.7
26.1
34.3
15.1
19.6
28.6
6.4
11.7
9.6
26.1
14.7
8.1
22.1
22.2
13.2
22.9
35.2
21.1
0% 5% 10% 15% 20%
San Antonio
Washington
Richmond
Seattle
Atlanta
Tampa
Boston
Phoenix
Palm Beach
Fort Lauderdale
Jacksonville
Denver
Northern New Jersey
Salt Lake City
Charlotte
Orlando
Raleigh
Miami
Austin
Nashville
Share of Inventory
Under Construction
Note: Includes markets with 75,000+ units inventory. Labels
show Under Construction in Thousand Units.
1.2
1.9
2.6
4.4
5.8
2.3
6.8
5.9
4.6
5.2
14.8
28.5
3.2
5.1
4.7
4.8
24.3
5.1
59.2
4.3
0% 5% 10% 15% 20%
Tucson
Memphis
Norfolk
Baltimore
Orange County
Oklahoma City
San Diego
Detroit
Inland Empire
East Bay
Chicago
Los Angeles
Pittsburgh
Indianapolis
Saint Louis
Cleveland
Houston
Sacramento
New York
Milwaukee
Share of Inventory
Under Construction

18. Chicago Submarkets With The Most Construction
Source: CoStar As of January 2023
0 1,000 2,000 3,000 4,000 5,000 6,000 7,000
North DuPage County
South Lake County IN
Northeast DuPage County
Far Northwest Suburban Cook
East Suburban McHenry
Kenosha
Southwest Lake County
Southwest Chicago
North Lakefront
Downtown Chicago
Units
Under Construction

19. Submarkets With The Most Construction Growth
Source: CoStar As of January 2023
0% 5% 10% 15% 20% 25%
Near North Suburban Cook
Northeast DuPage County
North Will County
Kenosha
North DuPage County
South Lake County IN
Far North Suburban Cook
Downtown Chicago
Southwest Lake County
East Suburban McHenry
Share of Existing Inventory
Under Construction

20. Markets Most At Risk for 4&5 Star Over Supply — Chicago Not on
the List
20
2022 Supply vs. Vacancy Rate Increase Decline in 4&5 Star
3 Year Average 4Q 21 vs 3Q 22 Rent Growth
New York Palm Beach Palm Beach
Austin Phoenix Las Vegas
Phoenix Tucson Tucson
Minneapolis Tampa Tampa
Nashville Las Vegas Orange County
Saint Louis Fort Lauderdale Jacksonville
Tampa Raleigh Phoenix
Raleigh Jacksonville Atlanta
Jacksonville Atlanta Austin
Seattle Norfolk Fort Lauderdale
Red Yellow
Jacksonville Austin Atlanta
Phoenix Palm Beach Las Vegas
Tampa Raleigh Ft Lauderdale
Tucson

21. Multifamily
Demand Fundamentals:
Absorption & Vacancy

22. Chicago Supply, Demand and Vacancy
Source: CoStar End of 22Q4
-5,000
0
5,000
10,000
15,000
20,000
25,000
0%
1%
2%
3%
4%
5%
6%
7%
8%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Net
Absorption
and
Net
Deliveries
in
Units
Vacancy
Rate
Year
Net Absorption (Y/Y) Net Deliveries (Y/Y) Vacancy Vacancy Historical Avg

23. Chicago Baseline Forecast: Supply, Demand and Vacancy.
Outside of 2020, Absorption > Supply Since 2018
Source: CoStar End of 22Q4
-5,000
0
5,000
10,000
15,000
20,000
25,000
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
Net
Absorption
and
Net
Deliveries
in
Units
Vacancy
Rate
Year
Net Absorption (Y/Y) Net Deliveries (Y/Y) Vacancy Vacancy Historical Average

24. Vacancy: Interest Rate Shock Vs. Baseline Forecasts
Sources: CoStar End of 22Q4
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
Vacancy
Rate
Year
Vacancy: Interest Rate Shock Vacancy: Baseline

25. 0K
50K
100K
150K
200K
250K
300K
0%
2%
4%
6%
8%
10%
12%
2014 2015 2016 2017 2018 2019 2020 2021 2022
Quarterly Change in Demand Quarterly Change in Supply Vacancy
National Multi-Family Supply, Demand, Vacancy. Absorption
Under Performing Compared to Chicago
Quarterly
Change
in
Supply
&
Demand
Vacancy
Rate

26. Chicago’s Multifamily Occupancy Projected to Outperform Nation
Source: CoStar, January 5, 2023

27. Top Net Absorption
3.8
3.8
4.1
4.3
5.1
5.1
5.2
5.4
5.6
6.0
6.2
8.0
8.7
9.0
9.0
9.5
11.5
12.0
12.6
30.1
0 5 10 15 20 25 30 35
Columbus
Philadelphia
Portland
Nashville
Charlotte
San Jose
Kansas City
Miami
Orlando
Boston
Denver
Seattle
Houston
Austin
Chicago
Minneapolis
Dallas-Fort Worth
Washington
Los Angeles
New York
Thousand Units
Net Absorption (Last 4 Quarters)

28. What’s New in Net Absorption?
1. No US Region Dominates 2. Major Metros Are Coming Back
3.3
4.1
3.8
30.1
3.1
1.6
8.0
12.0
6.2
2.4
6.0
2.0
5.1
5.6
4.3
5.4
5.2
5.1
9.0
9.5
(3%) 0% 3% 6%
San Francisco
Portland
Columbus
New York
Northern New Jersey
Omaha
Seattle
Washington
Denver
Jacksonville
Boston
Salt Lake City
Charlotte
Orlando
Nashville
Miami
Kansas City
San Jose
Austin
Minneapolis
Share of Inventory
Net Absorption (Last 4 Quarters)
Note: Includes markets with 75,000+ units inventory. Labels
show Net Absorption in Thousand Units.
-3.5
-1.3
-2.4
-1.9
-1.1
-0.9
-1.4
-0.5
-0.4
-0.2
0.1
0.1
0.3
0.4
0.4
1.4
0.8
2.2
1.1
1.2
(3%) 0% 3% 6%
Las Vegas
Tucson
Baltimore
Inland Empire
Norfolk
Memphis
Detroit
Oklahoma City
Sacramento
Atlanta
San Antonio
Orange County
Indianapolis
Cleveland
Fort Lauderdale
Phoenix
Pittsburgh
San Diego
Cincinnati
Saint Louis
Share of Inventory
Net Absorption (Last 4 Quarters)

29. Multifamily
Rent

30. Sun Belt Rent Growth Dominance Ends
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
2019 Q1 2019 Q2 2019 Q3 2019 Q4 2020 Q1 2020 Q2 2020 Q3 2020 Q4 2021 Q1 2021 Q2 2021 Q3 2021 Q4 2022 Q1 2022 Q2 2022 Q3 2022 Q4*
Year-Over-Year
Rent
Growth
Period
Sun Belt Nation
Source: CoStar, November 2022
* Forecast

31. |
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0% 2% 4% 6% 8%
Philadelphia
Washington DC
Inland Empire
Orange County
Detroit
Los Angeles
Seattle
Pittsburgh
Orlando
Chicago
Denver
New York
Miami
Cincinnati
San Francisco
Columbus
Charlotte
Kansas City
Portland
Northern New Jersey
San Jose
San Diego
2023 Forecast Pre-Pandemic 5 Yr Avg
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-2% 0% 2% 4% 6% 8%
Palm Beach
Phoenix
Austin
Atlanta
East Bay
Nashville
San Antonio
Jacksonville
Minneapolis
Raleigh
Las Vegas
Houston
Saint Louis
Salt Lake City
Tampa
Sacramento
Memphis
Boston
Milwaukee
Richmond
Dallas-Fort Worth
Fort Lauderdale
2023 Forecast Pre-Pandemic 5 Yr Avg
2023 Apartment Rent Growth Forecasts – Changes Coming
Source: CoStar, October 2022

32. YOY Rental Growth, Chicago CBD (Orange) Vs. Suburban (Blue)
Source: CoStar, January 5, 2023

33. Chicago Market Rent Growth, YOY, Base Case Vs. Inflation Adjusted
Source: CoStar, December 2022

34. Submarkets With The Highest Rent Growth
Source: CoStar End of 22Q4
7.1%
7.3%
8.5%
8.6%
10.0%
0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0%
Near North Suburban Cook
Des Plaines/Arlington Hts Corridor
Porter County
Elgin/Dundee
North DuPage County
Change from Previous Year
22Q4

35. Submarkets With The Lowest Rent Growth
Source: CoStar End of 22Q4
2.9%
2.8%
2.4%
0.8%
-1.6%
(2.0%) (1.0%) 0.0% 1.0% 2.0% 3.0% 4.0%
DeKalb
Far North Chicago
Kenosha
North Lake County IN
South Lake County IN
Change from Previous Year
22Q4

36. Chicago Concessions by Location
1/1/20
2/1/20
3/1/20
4/1/20
5/1/20
6/1/20
7/1/20
8/1/20
9/1/20
10/1/20
11/1/20
12/1/20
1/1/21
2/1/21
3/1/21
4/1/21
5/1/21
6/1/21
7/1/21
8/1/21
9/1/21
10/1/21
11/1/21
12/1/21
1/1/22
2/1/22
3/1/22
4/1/22
5/1/22
6/1/22
7/1/22
8/1/22
9/1/22
10/1/22
11/1/22
12/1/22
Percent
Offered
Concessions
Period
Total CBD Suburban
Source: Apartments.com, January 2023

37. Multifamily
Sales

38. Chicago Sales Volume By Property Type
Source: CoStar
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Sales
in
Billion
Dollars
Year
Office Retail Industrial Multifamily

39. Quarterly Sales Volume
Source: CoStar End of 22Q4
0.0
0.5
1.0
1.5
2.0
2.5
3.0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Sales
in
Billion
Dollars
Year
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

40. Multifamily Sales Volume, by Market
27.2
23.1 22.4
20.3
18.0
16.2
12.9
11.0 10.1 9.3 8.5 8.5
7.3 7.3 7.2
0
5
10
15
20
25
30
35
Sales
in
Billion
Dollars
Sales Volume (21Q4 to 22Q3)

41. Inflation Adjusted, Price/Unit Expected to Drop. Thoughts on
Forecast?
Source: CoStar, January 5, 2023

42. Rising Price PSF for Class B (Orange) Value-Add Opportunities
Source: CoStar, January 5, 2023

43. Large Multifamily Chicago Sales Transactions, 22H2
Buyer: Waterton (Local, Institutional/Investment Manager)
Seller: Wood Partners (National, Private Developer)
The Elle, rebranded from Alta Roosevelt Apartments
801 S Financial Place, South Loop
Built 2017
Sale Price: $170,000,000 or Approximately $343,000/Unit
Date: October 2022
100% occupied at time of sale; Retail was 95% leased
Notes: Sold below replacement cost. In June, American
Landmark Properties (Chicago) and Evergreen Residential
(Dallas) backed out of $180 million agreement.

44. Buyer: Morgan Properties (Private Developer)
Seller: Harbor Group International (Institutional)
Addresses:
Blackhawk Apartments (371 Units), Elgin
The Gates of Deer Grove (204 Units), Palatine
The Lakes of Schaumburg (428 Units)
Sale Price: $181,000,000 or Approximately
$180,000/Unit
Date: July 2022
Actual Cap Rate: 5.37%

45. Over $1.2 B Proposals for Office → Resi Conversions Within the
LaSalle Street Corridor
• Lightfoot’s Goal: 1,000 New Apartments, at least 300 with affordable rents.
- Paid for with TIFs, grants and historic tax credits.
- Nine proposals for seven CBD vintage buildings, all in
foreclosure or financial distress, approximately 535 affordable
Units (AR) Proposed.
Including:
400 S LaSalle (former Cboe Global Markets HQ), 226 beds for student housing
111 W Monroe (former BMO office tower), 349 Apts / 105 affordable (AR) (Prime Group)
208 S LaSalle, two proposals: 208 / 84 AR (Prime Group) or 102 / 30 AR (Brinshore Development)
Clark Adams Building, 423 / 127 AR (Maven Development Group) or 247 / 185 AR (Blackwood Group)
135 S LaSalle, 430 / 129 AR (Riverside Investment & Development & AmTrust Realty)
30 N LaSalle, 432 / 130 AR (Golub and American General Life Insurance)

46. CoStar and Supplemental Bibliography
Office
The Google Effect
• Chicago's Central Loop, Detroit's Corktown Hope Google Helps Them Attain Fulton Market's Office Vibe
• Google Makes $156 Million Loan on Chicago’s Thompson Center, Which It Plans To Buy After Redevelopment
• Chicago Office Tower Going Up for Sale After Google’s Deal To Buy Nearby Thompson Center
• Chicago Office Towers Sell for $118 Million, Big Discount to Previous Owner’s Debt
Central Loop Threats
• Dallas-Based Developer Pays More Than $100 Million for Land in Chicago’s Fulton Market
• Boston Firm Expanding Chicago Office in Fast-Growing Fulton Market
• Top Office Leases Recognized for Chicago 22Q3
Opportunities
• LaSalle Street Reimagined (City of Chicago)
• Diverse New Tenant Mix in Chicago Bolsters a Market in Recovery
• Tides Still Turning in Favor of Chicago’s Suburban Office Markets
• (Transit oriented developments) Silicon Valley Bets on New Transport to Counter the Rise of Remote Work (Wall Street Journal)
• Lack of Industry Diversity in Chicago's Central Loop Both Blessing and Curse for Office Market
• Redevelopment a Cure for the Chicago Office Market's COVID, Supply-Demand Woes
Retail
While Downtown Chicago Retail Sputters, Urban and Suburban Markets Are on the Right Track

47. Multifamily
Over $1.2 Billion in Office-to-Residential Conversions Proposed for Chicago’s LaSalle Street Corridor
At $600 Million, Apartment Portfolio Sale Is One of Chicago’s Biggest in Years
Large Chicago-Area Mall Hops on National Trend, Replaces Bloomingdale’s With Apartments
Multifamily Conversions Could Be a Lifeline for Chicago's Ailing Hotels
Chicago's Apartment Demand Fundamentals Offer Upside, Stability to Investors
Despite Population Loss in Illinois, Demand for Chicago's Apartments Remains High
Against the Odds, Studio Apartments Survive COVID
Domestic Migration Trends - June 2022 (Placer.ai)
Office
• Chicago's Central Loop, Detroit's Corktown Hope Google Helps Them Attain Fulton Market's Office Vibe
• Google Makes $156 Million Loan on Chicago’s Thompson Center, Which It Plans To Buy After Redevelopment
• LaSalle Street Reimagined (City of Chicago)
• Diverse New Tenant Mix in Chicago Bolsters a Market in Recovery
• Tides Still Turning in Favor of Chicago’s Suburban Office Markets
• (Transit oriented developments) Silicon Valley Bets on New Transport to Counter the Rise of Remote Work (Wall Street Journal)
• Lack of Industry Diversity in Chicago's Central Loop Both Blessing and Curse for Office Market
• Redevelopment a Cure for the Chicago Office Market's COVID, Supply-Demand Woes
Why Chicago?
City Council passes Lightfoot's $16.4 billion 2023 budget (Crain’s Chicago Business)
LaSalle Street Reimagined (City of Chicago)
Crain’s Forum on Climate Migrants or “Climigrants.” (Crain’s Chicago Business series)
World Business Chicago, the City’s public private economic development agency
Local Economic Snapshot: Chicago-Naperville-Elgin MSA (Federal Reserve Bank of Chicago)
CoStar and Supplemental Bibliography

48. These materials contain financial and other information from a variety of public and proprietary sources. CoStar Group, Inc. and its affiliates (collectively, “CoStar”) have assumed and
relied upon, without independent verification, the accuracy and completeness of such third party information in preparing these materials. The modeling, calculations, forecasts,
projections, evaluations, analyses, simulations, or other forward-looking information prepared by CoStar and presented herein (the “Materials”) are based on various assumptions
concerning future events and circumstances, which are speculative, uncertain and subject to change without notice.
CoStar does not represent, warrant or guaranty the accuracy or completeness of the information provided herein and shall not be held responsible for any errors in such information. Any
user of the information provided herein accepts the information “AS IS” without any warranties whatsoever. To the maximum extent permitted by law, CoStar disclaims any and all liability
in the event any information provided herein proves to be inaccurate, incomplete or unreliable.
© 2022 CoStar Realty Information, Inc. No reproduction or distribution without permission.
Thank You!
Rhea Stephen
Senior Director of Market Analytics, Chicago
312.283.0196
rstephen@costar.com