Chicago’s transportation, distribution, and logistics (TD&L) sector remains a critical anchor of the regional economy. Chicago leads the nation with the most industrial real estate square footage and ranks second in logistics employment. While there is a labor shortage, TD&L quarterly employment growth is up 0.4% from last quarter, totaling 272,000 employees, according to World Business Chicago.
However, economic pressures, shifting supply chains and changing U.S. policy has left many industrial occupiers hesitant to make real estate decisions. But is that hesitation warranted in the TD&L sector?
In the following article, we will touch on five key trends that are shaping the future of logistics real estate in Chicago, and what those trends mean for market fundamentals and investment.
1. Resilience, Nearshoring and Reshoring Bring the Supply Chain Closer to Home
Chicago’s logistics has shown its resilience and has an established infrastructure and diverse industrial base that supports strong demand, even as companies continue to figure out changing trade dynamics.
Chicago is also a major logistics hub, ranking as the nation’s #1 “port” by value of goods in recent years, due to the high-value freight flowing through O’Hare International Airport and the region’s rail network. In fact, Chicago’s rail network is so extensive that 25% of all U.S. freight trains and 50% of intermodal trains pass through Chicago, and 2025 intermodal volume is up 7.8% year over year, with 7.8 million containers originating/terminating in the metro. In addition, Union Pacific and CPKC launched high speed intermodal services, helping move Chicago’s cumulative $3 trillion in goods into and through the region faster and more efficiently.
For all these reasons, Chicago stands to benefit from increased nearshoring and reshoring efforts, as firms look to reduce dependence on overseas suppliers and improve supply chain reliability.
2. AI, Predictive Analytics, Automation and Robots Reduce Costs and Grow Efficiency
Chicago has also emerged as a national leader in logistics technology, with 100-plus logistics-tech firms based in the city. Industry surveys show that 61% of supply chains face delays due to understaffing, and AI is filling these gaps by automating planning and forecasting.
For example, Project44 launched new AI tools like virtual assistants and data cleansing agents to automate and optimize supply chains and FourKites introduced AI-powered yard management using cameras and computer vision to improve trailer and gate flow. These types of tools are helping reduce costs, forecast disruptions, and address labor shortages.
Warehouses and fulfillment centers in Chicago are also adopting automation at scale. Companies like Amazon and Walmart are upgrading their facilities to accommodate drones for inventory, automated sorting systems, autonomous forklifts, and automated storage and retrieval systems. Local startups like Ware, as well as Vecna Robotics, which is investing in ground-to-ground and low-lift workflow capabilities and development of new robots, are examples of smaller companies that are also driving innovation in this space.
3. Labor Market Pressures and Regulatory Challenges Require Action
While there is a labor shortage in Chicago, which does remain a key constraint, TD&L quarterly employment growth is up. In addition, approximately 37% of logistics organizations report significant staffing gaps—especially those in trucking and warehouse roles. Another labor market pressure is the high turnover and rising wages, which companies are attempting to address through signing bonuses, automation, and workforce training.
Trade policies are also presenting some challenges. For example, emissions regulations and wage mandates are increasing compliance costs, and carriers who are operating across state lines face stricter rules from states like California. International trade agreements may further impact freight flows in the future. In addition, volatility of fuel prices also remains a threat due to global events and Illinois’ inflation-linked fuel tax. On that front, fleets are investing in fuel-efficient equipment and piloting alternative fuels like CNG and electric trucks to reduce long-term exposure.
4. Tariff Uncertainty and Trade Risk Driving Up Container Volume
Proposed 2025 tariffs on imported goods—particularly from China and other select emerging markets—are creating uncertainty across the warehousing and logistics sectors, which is another key trend to watch in the coming year. As retailers and manufacturers brace for potential cost increases, many of them have already started front-loading inventory to take advantage of current tariff-free or lower-duty pricing.
That preparation has also temporarily led to higher container volumes at O’Hare International Airport and the region’s extensive intermodal network, particularly for consumer electronics, machinery and apparel. If these tariffs are enacted as they are currently proposed today, the impact could be dampened by long-term import demand, especially in those key categories—all of which are currently main contributors to Chicago’s freight economy.
Shifting supply chains, nearshoring trends, as mentioned earlier, and tariff-driven route changes could redirect some freight away from Chicago if not counterbalanced by domestic production or new trade lanes.
5. Infrastructure, Weather and Economic Concerns Disrupting Freight Flow
Despite major infrastructure investments, legacy bottlenecks persist throughout the transportation network. Rail congestion, highway delays—particularly on I-294 and I-55—and grade crossing issues remain prevalent. Additionally, extreme weather such as snow, flooding, and temperature swings continues to disrupt freight flows and highlight the long-term impact of climate volatility.
Slower economic growth, elevated inflation, and high interest rates are tempering freight demand. Retail inventories remain high, and Midwest manufacturing output has softened. An oversupply of trucking capacity has depressed rates, though a rebound in consumer or industrial activity could quickly reverse this trend.
By the Numbers
The question remains—how are these key trends impacting the TD&L real estate fundamentals? Overall, Chicago’s logistics sector remains resilient, powered by geographic advantage, industrial scale, and technological innovation. This sector has been right-sizing and returning space to landlords since the COVID-era real estate boom, when 3PL firms rapidly expanded due to e-commerce demands. In the first quarter of 2025, the TD&L sector absorbed nearly 4.4 million square feet of space, an encouraging sign. The vacancy rate stands at 6.4%, just slightly above Chicago’s all-industrial average of 5.8%.
However, as we move forward in 2025, companies’ ability to navigate workforce constraints, regulatory shifts, and economic uncertainty will be key. Continued investment in automation, infrastructure, and training will help ensure Chicago retains its position as the nation’s logistics command center.
Brandon Pappas is Vice President of Data Analytics and Business Development at the Rosemont, Illinois, office of Lee & Associates of Illinois.
