Multifamily Market Slows, But Demand Remains Strong

Chicago-based CEDARst just wrapped up several attention-grabbing projects, for example, and will soon break ground on several more.
The multifamily market took off after the end of the recession and was soon setting records for new construction and investment, especially in core urban areas. And although a natural and largely expected slowdown has recently taken hold, many developers still had a great 2017, and now look to 2018 with confidence.

Chicago-based CEDARst just wrapped up several attention-grabbing projects, for example, and will soon break ground on several more. The company raised more than $150 million of fresh capital in 2017, with an additional $250 million projected in the first half of 2018 across a number of upcoming developments.

“There is no doubt that the multifamily market has softened,” Will Murphy, managing partner of CEDARst, tells “It’s a two-month concession market and rent growth has flattened out.”

However, “the debt market is still active and there is still investor demand.” And many of the company’s projects are in amenity-rich neighborhoods where demand remains intense. Furthermore, it is renovating a number of historic buildings, always popular with downtown renters, and concentrates on creating the smaller units so appealing to cost-conscious millennials.

“That gives us a distinct advantage,” Murphy says. An average downtown unit might be 750 square feet, but CEDARst typically produces ones of 500 square feet, and even as small as 300 square feet.

Notable CEDARst projects capitalized at the end of 2017 include:

The Alfred at 30 E. Adams St. – A $60 million recapitalization, including both equity and debt, funded by: HUD, Blue Vista, and JP Morgan Chase. It represents the first HUD 221(d)(4) closed on a development in downtown Chicago since the Presidential Towers in 1986. Listed on the National Register of Historic Places, renovation on this project is scheduled to begin in early 2018 and will include 176 FLATS-branded apartments and ground floor retail.
The Lawrence House at 1020 W. Lawrence Ave. – $41 million permanent loan, funded by Freddie Mac. Located in Uptown, the project boasts 344 FLATS apartments and five retail spaces, including Heritage Outpost and Larry’s Bar, with 3 Squares diner coming in early 2018. Last June, Urban Land Institute Chicago honored the project with its Historic Revitalization Vision Award.
Notable CEDARst projects to occur in first half of 2018 include:

The Draper at 5050 N. Broadway Ave. – a projected $90 million recapitalization, including both equity and debt. This capital will allow CEDARst to begin the first phase of a planned development approved in 2017. Phase I consists of the renovation of a 400,000 square foot office building to 350 FLATs style apartment units. Upon completion of both phases, the development will consist of two, class A apartment developments with more than 700 units and 75,000 square feet of retail.
Bush Temple at 801 W. Chicago Ave. – a $90 million recap, both equity and debt, to facilitate the refinance of Phase I and development of Phase II. The Bush Temple consists of two phases, the first of which is the 101 units completed in December and currently in lease-up. Plans for Phase II include a 15-story tower, with 130 micro units. Cedar will break ground on the high-rise by this year’s second quarter.
“It was an extremely busy year-end for us,” Murphy adds. “In terms of capital placed, the first half of 2018 will be even busier. The unique nature of our projects and past track record have allowed us to successfully attract capital.”

Murphy believes that although concessions are back, and developers are in the midst of completing a significant number of Chicago projects, tenants will show up and absorb the new units without any decline in rental rates. “We are still low on apartments in the city.”—Brian J. Rogal