Chicago’s Condo Deconversion Cycle Continues as Market Pressures Mount

Written by:

Steve Marcinuk

Date:

24 Nov 2025

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Chicago’s multifamily market operates with a consistency that distinguishes it from more volatile coastal cities. While markets like Miami and New York are prone to dramatic swings, Chicago’s performance has remained stable, marked by steady growth rather than sharp booms or busts. This stability, as described by Kevin Rocio, founder of ROC Advisory Group, has created unique opportunities—particularly in the condo deconversion space, where apartment buildings that were previously converted to condominiums are now being reverted back to rental properties.

This ongoing cycle is driven by the strength of Chicago’s rental market and the increasing financial strain on condo associations, making deconversions a practical solution for many owners and investors.

The Deconversion Cycle: From Condos Back to Apartments

Rocio has witnessed the full arc of the deconversion cycle over his 33-year real estate career, which began in lending before shifting to commercial brokerage. As a lender, he warned clients buying condo conversions that short-term cosmetic upgrades—like new appliances or flooring—would eventually give way to costly capital repairs.

“I used to tell them, ‘The refrigerator and hardwood floors look nice, but down the line, this building will need a new facade or roof. You’re buying a unit for $200,000 with $7,000 down, but special assessments could ruin your finances,’” Rocio recalls.

These warnings largely went unheeded during the condo boom. Now, many of those same buildings are struggling to fund major repairs, and owners unable to afford large special assessments are seeking buyers willing to deconvert the properties back to apartments. Rocio notes, “Those same buildings are coming in and saying, our owners can’t afford the special assessments, so we want to sell the building to an investor who wants to convert it back to apartments. The cycle continues.”

Current Market Dynamics: Deconversions Slow but Steady

While deconversion activity peaked in 2017–2018, the market remains active today. Rocio recently closed a deconversion and has another eight-unit property under contract in Bronzeville. Investors now base their offers on prevailing rental values, not condo sale prices. “The pricing is based on what the units would rent for in today’s market,” Rocio explains. “Chicago’s rental market is very strong, so the value of that unit as an apartment is higher than that unit as a condominium.”

The typical deconversion process involves investors quietly acquiring units as they become available, often waiting until they control about 85% of the building before negotiating for the remaining units. The total acquisition cost usually comes in around 25% below the property’s projected value as a rental asset.

Geographic Patterns: Where Deconversions Are Most Active

Deconversion activity is concentrated in neighborhoods where economic pressures are most acute and building maintenance has lagged. Bronzeville, South Shore, Lincoln Park, Uptown, Albany Park, and Rogers Park are the most active areas for these transactions.

“In neighborhoods like South Shore and Bronzeville, a $30,000 special assessment is a major burden for owners earning $60,000 a year,” Rocio observes. In contrast, suburbs like Evanston and Oak Park—with higher household incomes and better-maintained buildings—see far fewer deconversions.

The age and composition of building ownership also influence deconversion prospects. Buildings owned predominantly by people in their 20s to 40s are more likely to see successful deconversions, as younger owners are less attached to staying in place and more likely to accept buyouts. Older ownership groups tend to resist selling, even when faced with rising costs.

Holdout Dynamics: Legal and Financial Realities

In deconversion scenarios, Illinois law generally favors majority owners. Once investors control a large enough share—typically 75% or more—they can force a sale of the remaining units, although holdouts can challenge the process in court. However, legal precedent strongly supports the majority’s right to pursue the property’s highest and best use.

Rocio advises owners approached in deconversions to negotiate rather than litigate. “The best price you’re going to get is probably what the buyer is offering you, because if you go to court, you’ll likely get the same price, minus legal fees,” he says.

Rising property taxes have made owners more likely to accept buyouts. “Especially nowadays, with property taxes being as high as they are, if the deal makes sense, they’re moving forward,” Rocio adds.

Buyer Landscape and Financing Structures

The pool of deconversion buyers ranges from institutional investors pursuing $10–50 million deals to smaller players in the $2–5 million range. Large transactions typically rely on Fannie Mae and Freddie Mac financing, while local banks handle smaller acquisitions under $5 million.

These buyers are attracted by the relative stability of Chicago’s rental market and the opportunity to acquire properties at a discount compared to purpose-built apartment buildings. The deconversion niche requires specialized expertise, and only a handful of brokers in Chicago focus on these deals.

Market Intelligence and Common Pitfalls

Success in the deconversion market depends on understanding both the building’s ownership demographics and the dynamics of its homeowners association (HOA). Many investors fail by acquiring units without first establishing relationships with the HOA or assessing the building’s financial health.

“Have that conversation with the HOA,” Rocio recommends. “If they’re running a capital study, ask to participate and offer alternatives to owners. Owners are often shocked by reserve study results and need options beyond just facing a hefty special assessment.”

HOAs should proactively communicate with owners about upcoming repairs and financing options. Rather than simply announcing special assessments, boards can facilitate group sales or help arrange financing for improvements, providing a more palatable path for residents.

Broader Market Context: Investment Activity and Tax Pressures

Despite higher interest rates and economic uncertainty, Chicago’s multifamily investment market remains active. Rocio completed 38 transactions this year, and other brokers in the space report 40–80 deals annually. Property taxes remain a significant factor, with assessments increasing 9% to 50% year-over-year depending on neighborhood. These rising taxes are influencing both investor calculations and owner willingness to sell.

New construction remains concentrated in downtown Chicago and select suburbs like Highland Park and Niles, offering modern alternatives that compete with older condo and rental stock. However, this new supply has not significantly affected rental demand in most neighborhoods, as Chicago’s population base continues to support high occupancy in existing multifamily properties.

Looking Ahead: Opportunities and Risks

The deconversion market remains a specialized niche, with a small group of experienced brokers often sharing information and referring deals based on transaction size and complexity. This collaborative approach is necessary given the technical, legal, and interpersonal challenges unique to deconversions.

For institutional investors, the most attractive opportunities are in stabilized assets developed during the COVID period that are now fully leased and ready for long-term ownership. These properties offer steady income with less risk than conversion or ground-up development projects.

The ongoing cycle of condo conversion and deconversion in Chicago is a direct result of the city’s stable rental demand and the ongoing challenges of building maintenance and ownership costs. As long as rental demand remains strong and condo associations continue to struggle with funding repairs, deconversions will provide opportunities for investors who understand both the financial and human factors driving these transactions.

In summary, Chicago’s deconversion market is a product of the city’s steady multifamily fundamentals, rising property taxes, and the practical realities of building upkeep. For owners facing unaffordable assessments and for investors seeking discounted rental assets, the cycle is likely to persist, shaped by demographic trends, legal frameworks, and the continuing evolution of Chicago’s housing market.