www.dailyherald.com
September 22, 2024
Katlyn Smith
Holladay Properties has built hundreds of upscale apartments in downtown Downers Grove, Lombard and Westmont.
The developer’s new apartment building, within walking distance of the Glen Ellyn Metra train station, has a long list of amenities, starting with a hotel-style lobby with a fireplace. Adjacent to the lobby is a bicycle studio, craft room and “cybercafe” for residents. But the project is notable for another reason.
“I have never seen demand like we’re seeing at Glenwood Station,” said T. Drew Mitchell, partner and senior vice president of development at Holladay. “It’s extraordinary. I have 86 units, and we have over 400 people that are signed up on our prospect list that are interested.”
Demand is strong, and there’s “just not a lot of supply being added to the market,” says Ron DeVries, senior managing director of Integra Realty Resources.
According to Integra, 3,500 apartments, all class A luxury units, were delivered last year in the Chicago suburbs. Integra expects about 2,500 this year.
Holladay Properties is developing Glenwood Station, an 86-unit apartment building on the former McChesney & Miller grocery store property in downtown Glen Ellyn. Brian Hill/bhill@dailyherald.com
“There’s a number of deals under construction, but once these finish out, there’s just not much behind it,” DeVries said. “And even if you look at the 3,500 units from last year, if you think about how big the suburban market is, that’s just not very many units.”
A ‘big challenge’
In the entire suburban Chicago marketplace, 13 higher-density luxury apartment communities containing roughly 2,800 units were in their initial absorption period — meaning they were leasing and taking initial occupancy — at the close of the second quarter of this year, according to Schaumburg-based Tracy Cross & Associates, Inc.
Out of those units, 1,900 already had been leased and occupied, said Erik Doersching, president and CEO of the real estate consulting group. At that time, a dozen additional developments containing another 2,200 units had started construction.
There is activity, but for a “region of our size, it is, I would consider, an adequate amount, but not ample supply … We’re still somewhat supply constrained,” Doersching said.
It’s hard to get a deal started right now because of banks “not being willing to lend at terms that we saw before the run-up in interest rates,” DeVries said.
“It’s just a lot more difficult to get a loan. It’s a lot more difficult to raise equity, so the new starts have been very modest, if not nonexistent,” he said.
Integra surveys just under 120,000 units in the suburban market every quarter. The class A rent is pushing $2.50 a square foot, DeVries said.
“So the demand side is strong,” he said. “People are paying healthy rents. It’s just that the combination of construction costs and getting the debt and the equity together have just been a big challenge.”
Defining luxury
A class A complex is new construction, and apartments have granite or quartz kitchen countertops and in-unit, full-size washers and dryers, Doersching said.
“It’s a really quality development, and there’s ample communal, community amenities, which is all based on scale,” he said.
Who’s moving into those apartments?
“Typically, for new construction class A product, it’s a professional single or couple,” Doersching said.
Then there are the empty nesters and snowbirds.
“My parents’ generation are selling their estates to these millennials who are in household formation, but they have family nearby, and they want walkability, and there really isn’t a lot of good product for this demographic,” Holladay’s Mitchell said.
In recognition of empty nester needs, Glenwood Station units have walk-in closets. A cubby tower can be used for shoes, linens, or miscellaneous storage. The development also offers large, on-site storage lockers for people who are downsizing. And a craft room is meant as a place where residents can work on a painting or repair a vacuum.
Glenwood Station is situated at the northwest corner of Crescent Boulevard and Glenwood Avenue in downtown Glen Ellyn. Brian Hill/bhill@dailyherald.com
“There’s tools you can use and check out,” Mitchell said, because “a lot of people downsizing lost their little workshop in their basement or their sewing or craft room.”
Other unit types are designed for those working from home and young professionals living together. Residents also will find a conference room and a fitness center.
“We’ve got package handling that’s state of the art. Residents get notified when packages are delivered. We can accommodate cold package delivery,” Mitchell said.
Inside the apartments are soft-close cabinets and high ceilings.
“We have a large average unit size approaching 1,000 square feet. That’s pretty big for a multifamily project,” Mitchell said.
Glenwood Station is expected to start accepting leasing applications after Thanksgiving. Rent ranges from $1,750 to $4,500.
The economics
The developer has received interest in the property from more than 400 people. They don’t need to make a deposit to get on the list. But Mitchell explained via email that, typically, about 20% to 25% are very real and result in leases.
He attributes the interest in part to Glen Ellyn’s vibrant downtown.
“It’s really kind of your ideal suburban downtown. It’s extraordinarily walkable,” said Mitchell, adding that it’s replete with businesses that appeal to its residents.
He also cites another reason: the “lack of new product being introduced is also further helping.”
Before the Federal Reserve interest rate cut, Integra’s DeVries said earlier this month “the question is, what are the banks going to do?”
“Some banks, of course, will be aggressive and want to attract loans,” he said, “but it could be another year before these rates change enough to make the economics work better for new construction.”