At the 2019 Market Outlook, keynote speaker Brandon Svec of CoStar Group gave the commercial perspective of the 2019 real estate market.

1. State of the Multifamily Market
Brandon Svec – Market Economist
January 15, 2019

2. Agenda
— A Look at the Drivers
— Supply/Demand
— Rent Growth
— Capital Markets
— Takeaways

3. Driver 1: Population Growth

4. Neighborhood Growth Highly Bifurcated
Population Growth Estimate 2010 - 2016
CMAP, U,S. Census Bureau

5. Driver 2: Employment

6. Job Growth Strongest Downtown
Changes in Chicago-Area Private Employment 2010-2018
Source: Illinois Department of Employment Security
Note: Figures are for unemployment-insurance-covered private-sector jobs

7. Driver 3: Decline in H/O Rate
Renter HH Formations (000s)
60%
62%
64%
66%
68%
70%
72%
74%
0
50
100
150
200
250
300
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Renter HH Formations H/O Rate
H/O Rate

8. Chicago MSA Fundamentals

9. 2018 Demand Breakout by Location and Quality

10. Vacancy Across the MSA

11. U/C Inventory Remains Elevated

12. New Supply Increases By Submarket

13. 2017 Deliveries Focused on Northern CBD
Note: Height of building corresponds to unit size

14. 2018 Pushes South and Into the Neighborhoods
Note: Height of building corresponds to unit size

15. 2019 Deliveries Set to Build on 2018
Note: Height of building corresponds to unit size

16. Chicago Rent Growth Steady At 2%

17. Chicago Rental Growth Has Been Led By Class B

18. Rent Premium Remain High on Northside

19. Rental vs. Income Growth

20. Sales Volume and Pricing

21. Pricing Across the MSA

22. Takeaways
— Demand for units at record levels driven by strong lease-up of Class A
product downtown and in northern Chicago neighborhoods.
— Consistent job growth, population shifts, and changing consumer
preferences driving strong cycle for multifamily, especially downtown
• For how much longer can we grow jobs in a full employment market?
• For how much longer do Millennials stay urban and can Boomers and Gen Z plug
the hole?
— High level of starts in Q3 keeps U/C elevated
— 2019 deliveries push further into the neighborhoods
— Rents come back to life in 2018
— The potential impact on multifamily values from the local and state
fiscal situation should not be ignored

23. PRESENTED BY:
Brandon Svec
Market Economist
bsvec@costar.com
844.225.1777
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