Chicago’s economic climate continued to trend upward throughout the first quarter of 2018, with unemployment down to 5.4 percent year-over-year, a 60-basis-points-drop. With this, the local commercial real estate engine continues to hum. And according to an Avison Young report, the I-55 Corridor is seeing a lot of that activity.
Metro-wide, the construction, financial services, and manufacturing industries saw the most job growth. And the Chicago industrial market, comprised of over 1.1 billion square feet, continued to witness a declining vacancy rate across most major submarkets during the first quarter.
However, investment activity and transactional volume slowed when compared to previous quarters. Private capital was by far the largest investor in industrial product, comprising 67 percent of total funds invested.
Much of the space that was absorbed took place within the I-55 Corridor. In fact, while leasing activity across the market saw an uptick during the first quarter of 2018, no submarket saw more activity than the I-55 Corridor with 1.3 million square feet in transactions.
One notable new lease in the I-55 Corridor was logistics firm RJW Transport’s taking on of 356,621 square feet at 2601 Internationale Parkway in Woodridge. The facility, constructed in 1999, is two miles from I-355 and 1.5 miles to I-55 at the Joliet Road Interchange. The site enjoys ample parking and trailer storage.
Westrock, a manufacturer of paper and packaging products, renewed its lease for 259,744 at 365 Crossing Road in Bolingbrook. The firm has been at that location since 2016 when the Atlanta-based firm acquired a smaller company that was already located at the site.
Due to increased demand, the Chicago metro’s vacancy rate dropped 40 basis points from year-end 2017 to 5.9 percent. The I-55 Corridor was among the submarkets with the largest decreases, down 120 basis points, but the region still has an 11.6 percent vacancy rate.
Romeoville in particular has a lot of unleased space. Five separate properties, all over 400,000 square feet, remain completely unleased. They combine for nearly 3.7 million square feet of rentable warehouse space and all but one were constructed in the last two years.
Across the market, there was an increase in construction deliveries, with over half of those in two submarkets: the I-80 and I-55 corridors. Pennsylvania-based Exeter Property Group completed two, Class A buildings in Lockport: 16230-16342 W. 163rd Street. One building is 308,988 square feet with 50 trailer stalls; the other is 302,588 square feet with 48 trailer stalls. Both buildings offer 32-foot clear heights and 30 docks each.
Among the new construction starts along I-55, CT Realty Advisors is developing a two-building spec facility at the Interchange 55 Logistics Park. Totaling over 1.3 million square feet, both buildings will feature 36-foot clear height and 55 x 52 column spacing. Building A will have 64 dock doors and Building B will have 68, both expandable.
Prologis is constructing a separate speculative warehouse, at 2501 Internationale Parkway in Woodridge. The 283,436-square-foot building will offer up to 11,770 square feet of office space, 36-foot clear height, two drive-in doors and 29 exterior docks. Located within the Internationale Centre Business Park, the development is 1.5 miles from the I-55/I-355 interchange.
Across the market, asking rental rates dipped slightly during the first quarter of 2018—down 1.7 percent. Investment within industrial product was also decreased, with transactional volume dropping 13 percent from the fourth quarter of 2017.
While the I-55 Corridor isn’t seeing the level of infill development of submarkets like O’Hare, there are trends across the metro that apply here as well. For example, due to client demand, primarily within the e-commerce industries, users are requiring higher clear heights as well as additional parking. And of the 9.9 million square feet of industrial space now under construction, 72 percent is speculative. This will have a serious impact on market vacancy once these buildings are delivered.