Developers aren't worried about industrial slowing down—even with 17.9 million square feet of new construction in the sector—and they expect demand for this property type to continue.
But there are some factors that might cause uncertainty. Construction costs are expected to rise 4.3 percent, interest rates are increasing and the cost for those who want to invest in industrial real estate will grow higher, according to a report from Transwestern.
Activity in the industrial market today is driven by e-commerce, while logistics tenants and developers delivered 4.7 million square feet of new space, mostly tailored toward that industry, according to Transwestern. Leaders such as Amazon at 6521 W. Monee Manhattan Rd. and Georgia-Pacific at 23534 S. Central Ave. have already made big investments in the area. Proposed and planned developments located along I-57 between West Steger Road and West Manhattan Monee Road are becoming much more common, too.
The I-57 corridor hasn't seen as much growth as, for example the O'Hare market, but that doesn't mean it won't. The Village of Frankfort, a south suburb in Will County, is betting that a wave of activity will come. The village is considering, after property owners indicated interest, annexing parcels of unincorporated Will County where industrial activity is increasing, according to Rob Piscia, a spokesman for Frankfort.
This area—bounded by Stunkel Road, Dralle Road, Ridgeland Avenue and Harlem Avenue—is slated as a future home for several planned and proposed developments. Frankfort officials anticipate a large amount of future growth, and the move could diversify the community’s tax base, Piscia said.
Alex Genova, an experienced industrial broker with Transwestern in the south suburban market, sees Frankfort as being ready to take advantage of a key opportunity to attract new facilities and bring in more jobs.
“From a property tax standpoint it’s a good decision, residential then doesn't have to come up with as much money," Genova said if Frankfort were to approve the annexation. "These large industrial facilities, they actually do help communities."
Several brokers in the south suburbs are noticing tightness in the Chicago market and are preparing for more growth in the area. There are several acres of land ready for expansion, which is attractive to companies that grow quickly, Genova said. The area is already popular for industrial users because of its proximity to major expressways and space for new product. Currently the market is seeing mostly build-to-suit projects, but Genova thinks that will change in the next few years.
One reason I-57 hasn’t "exploded" with growth yet is the slow progress on several infrastructure projects, Genova said. If two major projects, the Illiana Corridor and the South Suburban airport, got off the ground that would spur even more industrial growth. However, the proposed Illiana highway, which would run through Will County, was tied up in federal courts after a problematic environmental impact report and put on hold. As for the South Suburban airport, Genova isn't holding his breath for that delivery either.
Some good news, though, is the new CSX Intermodal facility in Crete, which could act as a catalyst for development when the facility is complete in 2020. Although the project is still the preliminary stage, the plan would be to build a rail yard that would facilitate intermodal transfers between train and trucks, according to CSX's website. The facility will have a total of 10 tracks and seven zero-emission electric cranes, giving it the capacity to handle a half-million container lifts each year and space for 2,600 shipping containers.
Jeff Bennett, founder and president of McColly Bennett Commercial, thinks now is Kankakee's time to take advantage of the industrial wave. He has worked in the Kankakee market since the ‘80s, and has seen the full scope of the market. There are obvious advantages to the area, and Bennett thinks key qualities of Kankakee aren't completely realized yet by those in the industry.
"One of the things we find in our community is that we don't get the same peaks or bottoms. We are a much steadier market," Bennett said. "Right now, we're primed and ready to see acquisitions and expansions. When we start getting spec on the market in the coming year, there's no doubt companies will want to come here."
