Chicago’s industrial market is entering a new phase of momentum, largely because it never tipped into overbuilding during the post-pandemic boom. While other metros wrestle with excess supply, Chicago’s restraint has left it with steady leasing demand, low vacancy and enough rent growth to keep investors engaged.
“I would say the industrial investment sales market across metropolitan Chicago is as good as it’s been in the last few years, certainly since the Fed started raising interest rates in the spring of 2022,” said Mike Tenteris, vice chair of Cushman & Wakefield’s Industrial Advisory Group.
That backdrop is translating into renewed deal activity. Avison Young’s Erik Foster described Chicago’s investment sales market as “surging,” pointing to the 1.4 million square feet of speculative projects that broke ground in the second quarter as a sign of investor confidence ahead of a potentially breakout year in 2026.
“As interest rates trend lower, we anticipate greater momentum and investor confidence in the market,” Foster said. “We remain optimistic about the remainder of the year and beyond, driven by expectations of improving deal volume.”
The numbers back that up. Overall vacancy was recorded at 6.3% in Q2 2025 according to Avison Young, well below the national average of 9.3%. Leasing activity reached 25.2 million square feet in the first half of the year, only slightly behind the five-year average. In June alone, tenants signed 5.1 million square feet, underscoring resilience despite tariff pressures and broader economic uncertainty.
“The fact that we didn’t get overbuilt and we’re still leasing space, current vacancy rates remain low, and in certain size ranges we’re still seeing rent growth,” Tenteris said. “This certainly resonates well with investors, particularly when you look at the larger landscape of the Midwest.”
Much of the action is concentrated in infill properties and smaller spaces. Tenteris noted that sub-150,000-square-foot buildings are outperforming the broader market on occupancy and rent growth particularly in DuPage and Will counties. These properties can draw as many as 10 to 15 bids, reflecting how deeply investors are pursuing value-add strategies. Foster said new and big-box assets have not been as actively marketed, keeping attention focused on these opportunities.
“Much of the investor capital in the market right now is primarily focused on a value-add strategy,” Tenteris said. “One way to get there is by buying something where you think rents are going to grow and can sell at a cap rate at or below today’s spot cap rates.”
Recent transactions illustrate the trend. NorthPoint Development paid more than $87 million in June for two buildings in Elgin as part of a larger portfolio deal while Ares Industrial Management acquired twin properties in North Aurora totaling more than 429,000 square feet for nearly $58 million. Both deals traded near or above $100 per square foot, reflecting healthy pricing and steady buyer appetite.
That competition is supported by a healthier financing environment. Banks have returned to the lending market, joining life companies and CMBS providers, which has created more flexibility and larger potential deal sizes.
“Debt is driving deal volume right now,” Tenteris said.
Falling interest rates are adding to investor confidence and paving the way for more activity through the rest of the year.
“The market has demonstrated resilience throughout the downturn and we believe that Chicago is well-positioned to benefit from renewed investment activity,” Foster said.
Investors are also paying closer attention to fundamentals at the property level. Tenant credit, which had faded as a concern during the post-pandemic leasing surge, is once again under scrutiny. Lease terms are also being weighed carefully. While some investors prefer the security of three-to-five-year commitments, others are betting that demand will rebound and are comfortable with shorter durations.
“Many investors think that the leasing environment will improve in the near future, which is why they are actively pursuing value-add opportunities and properties with shorter lease terms,” Foster said.
Chicago’s construction pipeline tells a similar story of balance. Developers broke ground on seven speculative projects in Q2 totaling 1.4 million square feet even as overall construction volume is down nearly 24% from last year. The pipeline remains strong at 9.5 million square feet with more than half already committed through build-to-suit deals. Major projects include Walmart’s 1.25 million-square-foot distribution center in Belvidere and CJ Logistics’ 1.1 million-square-foot facility in Elwood.
“Selective speculative development in sub-markets with strong fundamentals present another avenue for growth – particularly when assets align with sub-market demand,” Foster said.
Challenges remain. Tariff uncertainty is delaying some decision-making and national and multinational tenants are taking longer to finalize moves. Even so, space is being absorbed as companies run out of time to wait. Against that backdrop, recently leased speculative buildings at market rents may present one of the market’s most overlooked opportunities.
“The biggest opportunity I see right now is in recently leased spec buildings at market rents with lease durations of five to 10 years,” Tenteris said. “With the yield premium that investors get by coming to the Midwest — based on the performance of the underlying fundamentals — it tells me it’s a pretty safe bet to be buying recently built, occupied buildings at cap rates that are 50 to 100 basis points higher than other gateways.”
Foster pointed to another opening in assets that owners had previously held back during the downturn.
“Significant opportunities exist for owners to selectively sell core assets that were previously held back from the market due to limited buyer interest,” Foster said. “With investor sentiment improving, these assets can now be strategically brought to the market.”
With fundamentals intact, financing loosening and confidence rising, Chicago’s industrial sector is positioned to draw both value-add and core investors in the months ahead. After years of resilience, the city may be approaching its long-awaited breakout moment.
