Fulton Market apartment market heats up, but slowdown could be on the way

Fulton Market has emerged as one of the nation’s hottest office markets, and with many employees wanting to live within a 15-minute walk to work, residential towers are rising alongside its office buildings.

Developer Sterling Bay and its partner Ascentris just unveiled Fulton Market’s newest apartments, a 282-unit building at 160 N. Morgan St. called The Dylan, and company officials say they expect it to quickly fill when leasing begins this summer.

“It’s an opportunity to live in the heart of it all,” said Amy Wexler, chief marketing officer for Sterling Bay.

The company is best known for renovating in 2015 an old cold storage building in Fulton Market into Google’s massive Midwest headquarters, as well as building McDonald’s new corporate campus nearby, kicking off the neighborhood’s transformation from an industrial area into a sleek office center. The Dylan is its first Fulton Market residential building.

Sterling Bay continues developing new office properties in Fulton Market. Last year, it finished 345 N. Morgan St., a 10-story building two blocks north, now more than 90% leased, according to CoStar. And in 2024, it plans to open 360 N. Green St., a 24-story property where Boston Consulting Group has agreed to occupy the top nine floors, leaving its current offices at 300 N. LaSalle St.

Fifteen new office developments totaling more than 3 million square feet were added to Fulton Market in the past three years, with new tenants, including many from the central Loop, filling up spaces as they opened, according to Colliers International, and it’s also one of the few areas expected to continue seeing falling vacancy this year.

All those employees will need somewhere to live, said George Stowers, managing director of residential for Sterling Bay, so new residences should lease faster than in other downtown buildings, including Millie on Michigan, located at 300 N. Michigan Ave. The company opened that luxury residential project last October, leased nearly 80% of its 289 units, and expects more than 95% occupancy by the end of this year.

“I expect demand in Fulton Market is going to be even stronger,” Stowers said.

Sterling Bay will fulfill its obligations under the city’s Affordable Requirements Ordinance by including 28 affordable units at The Dylan and contributing nearly $6 million to fund affordable housing at Solar Lofts, a 47-unit multifamily building at 2556 S. Federal St. on the South Side.

The Dylan includes a host of amenities common to new residential towers in the neighborhood. Tenants will have access to a 29th floor rooftop pool deck with cabanas, fireplaces, coworking facilities, and another amenity deck atop a brick masonry podium.

“We anticipate it will take 10 to 12 months to lease it up,” added Stowers.

That’s roughly the pace other developers have seen at new Fulton Market apartments.

Greystar opened its One Six Six, a 223-unit apartment building at 166 N. Aberdeen St. earlier this year, and is leasing about 28 apartments per month, according to Christine Kolb, senior director of development.

“One Six Six is performing exceptionally well, and the leasing is right where we thought it would be,” she said. “We’re very well-located between Google and McDonald’s, and that’s the type of residents we’re seeking, folks who work in the market.”

There’s a lot of competition to win over Fulton Market’s growing office population, said Ron DeVries, senior managing director at Integra Realty Resources, a real estate appraisal firm. Alongside all the new buildings, developers have roughly another 1,500 units under construction, and thousands more are planned or have been approved by city officials. And although he expects leasing for the existing and under-construction units to proceed quickly, the intense competition, as well as rising interest rates, means it could take years for the planned construction projects to break ground.

“The fundamentals in Fulton Market are still strong, and you might see one or two new developments happen, but I think for the most part, people are now waiting at the gate because it’s hard to get construction financing right now,” DeVries said.

Kolb said her firm put a hold on Fulton Market plans.

“We’ve kicked the tires on a number of different sites, but the numbers didn’t make sense, so we’re looking at sites outside Fulton Market,” she said.

Stowers said Sterling Bay still considers Fulton Market one of the strongest submarkets in the U.S., so even with the costs of borrowing going up, the company may launch more residential developments.

“We’ve got a lot of other land in Fulton Market that we’re studying.”