Chicago’s industrial market entered 2026 with a paradox that is reshaping capital markets activity: leasing demand surged at the end of last year even as new speculative development fell to its lowest level in a decade. That’s creating both confidence and constraint for investors navigating the market.
According to JLL’s Q4 2025 Chicago industrial report, leasing volume climbed from 8.4 million square feet in the first quarter to 12.7 million square feet in the fourth, pushing total 2025 leasing to 40.9 million square feet. Speculative development delivered just 5.6 million square feet during the year while vacancy held steady at 5.1%, signaling a market that remains fundamentally balanced despite elevated activity.
That combination has helped pull capital off the sidelines across a broader range of deal profiles than many expected after several cautious years.
“I wouldn’t say that any deal profiles are stuck right now, as the momentum in the market continues to pick up with significant capital looking to be placed,” said Sean Devaney, senior managing director of JLL Capital Markets. “Value-add opportunities continue to be highly coveted, but we have seen a resurgence of core-plus and core capital targeting Chicago – evident from the DuPage Infill Portfolio we sold in Q3 2025 and the recent closing of the I-90 East Commerce Center, which is a stabilized new construction deal.”
Devaney said JLL expects that trend to continue as investors respond to Chicago’s durable fundamentals, particularly in submarkets with strong logistics infrastructure and limited new supply.
Owner activity is reinforcing that outlook. Jack Brennan, managing principal of Brennan Investment Group’s Midwest region, said improving leasing conditions and more favorable debt terms have supported both acquisition and portfolio performance.
“In 2025, we observed a meaningful increase in leasing activity across our Midwestern portfolio of 12 million square feet,” Brennan said. “Acquisition activity was also robust which was aided by more attractive debt terms. In our view, continued leasing resurgence along with favorable capital markets conditions should propel the industrial market forward in 2026. Brennan remains a very active buyer of industrial in 2026.”
Debt availability has been a critical component of that activity. Devaney said lending conditions have improved materially from the dislocation seen earlier in the cycle.
“The debt markets remain very liquid and offer a variety of flexibility to meet buyer and owner needs, helping to facilitate transactions,” he said.
While capital is flowing, underwriting discipline remains firmly in place. That dynamic is especially visible in industrial outdoor storage (IOS), where investor interest has expanded alongside tighter credit standards.
“From our perspective, debt is generally playing a constructive role in getting IOS deals done rather than acting as an obstacle,” said Cary Goldman, founder and managing partner at Timber Hill. “There is still solid liquidity in the debt markets, and lenders are actively looking for well-underwritten industrial opportunities, particularly in sectors like IOS where fundamentals continue to perform.”
Goldman said loan sizing is increasingly driven by debt service coverage rather than headline leverage, forcing sponsors to be more deliberate in underwriting assumptions tied to rents, absorption and capital structure. At the same time, debt funds have grown more competitive, narrowing pricing gaps with traditional banks and offering greater structural flexibility.
“As a result, they are becoming a more meaningful participant in the IOS space, while banks continue to anchor the market for stabilized and lower-risk deals,” Goldman said.
That evolution has accelerated what Goldman described as the institutionalization of IOS.
“We are seeing larger portfolio-level executions occur with increasing frequency, which is helping bring additional depth and credibility to the sector,” Goldman said.
Looking ahead, market participants say a sustained increase in transaction velocity will depend less on capital availability and more on occupier health and macroeconomic alignment, particularly in asset classes tied closely to goods movement.
“To see a meaningful acceleration in deal velocity by late 2026, we first need to see the ‘freight recession’ move into the rearview mirror,” Goldman said. “Once our tenants return to profitability, their ability to expand and commit to long-term leases will catalyze the market.”
Devaney said broader transaction trends are already improving, noting that deal activity accelerated meaningfully in the second half of 2025.
“We are already seeing that momentum carry into 2026 and expect robust transaction velocity throughout the year,” Devaney said.
For Chicago’s industrial market, the message heading into 2026 is clear: capital is active again, but it is highly selective. Investors and lenders are rewarding strong fundamentals, disciplined underwriting and assets positioned to benefit from sustained tenant demand, a dynamic that is likely to define dealmaking in the year ahead.
