While the pandemic may have stymied other sectors, the industrial asset class soared in the U.S. during the course of 2020. This was true across Chicago as well, with certain submarkets outperforming others.
According to data compiled by Colliers International Chicago, the overall market witnessed a record 48.6 million square feet of new leases—an increase of 28 percent from the previous year. But where was this leasing activity the strongest?
I-80 Corridor: 5.49 MSF of absorption
Before the pandemic, there were concerns that the I-80 corridor was overbuilt following years of spec development. However, the submarket saw its largest year-over-year vacancy decrease on record last year, falling to 5.39 percent. Though the nearly 5.5 million square feet of absorption for the year didn’t reach the 5.8-million-square-foot mark of 2019, it was still one of the best years on record and far ahead of the other 22 submarkets that Colliers tracked.
Leasing activity in 2020 topped 9.4 million square feet—a new record for the submarket, and over 50 percent better than the tally from the previous year. While Amazon had two sizable leases, it wasn’t just e-commerce leading the charge in 2020. There were four leases greater than 1 million square feet from Harbor Freight, Scott’s Miracle-Gro, General Motors and CJ Logistics America.
Comprising 1.8 million square feet, there were six new buildings delivered to the submarket in 2020—three spec and three build-to-suit projects. Prologis took ownership of a four-building, 2.1-million-square-foot portfolio along I-80, part of their acquisition of Liberty Property Trust, and KKR was the other big investor, snagging the 1.2-million-square-foot 3300 Channahon Road in Joliet.
Southeast Wisconsin: 4.22 MSF of absorption
The Southeast Wisconsin submarket was full of superlatives last year: biggest annual net absorption, greatest amount of construction deliveries and most combined space under construction at one time. The vacancy rate in this very active submarket decreased by 148 basis points to 6.41 percent during 2020, the lowest rate in two years.
New leases and expansions in this submarket during 2020 added up to approximately 2.6 million square feet; this figure is down from the 3.3 million square feet notched in 2019, but healthily above the five-year average of 1.8 million square feet per year.
Amazon was responsible for the two largest new leases of the year, taking a combined 1.18 million square feet within properties in Kenosha and Sturtevant. Other tenants with new leases included Ta Chen International (205,732 square feet), Goodwill Industries (194,147 square feet) and Nosco (172,737 square feet).
All of this new leasing activity has made a dent in recently completed spec construction that has delivered during the past two years. Another 12 buildings, totaling 3.5 million square feet, came online in Southeast Wisconsin during 2020, half of which were spec and half of which were build-to-suit.
Northwest Suburbs: 1.25 MSF of absorption
E-commerce was king in this submarket as Amazon accounted for the Northwest Suburbs’ two largest leases—a new, 214,185-square-foot lease in Arlington Heights and another new, 162,000-square-foot deal in Palatine.
These and other transactions helped with the year-to-date vacancy, which stood at 5.05 percent at the close of the fourth quarter. However, it was a rocky year with vacant spec deliveries elevating what had been a record-low vacancy rate of 4.49 percent in the first quarter.
The 1.4 million square feet of construction deliveries that came online during 2020 accounted for the submarket’s largest ever total. These included three spec buildings (out of a total seven) totaling 567,454 square feet. Unlike the I-80 Corridor and Southeast Wisconsin submarkets, there are no active construction projects currently underway, though there are projects set to break ground this year.
The area has seen something of a development boom over the past few years and investors are also keen to acquire assets in this growing submarket. In 2020, that meant a bevy of portfolio acquisitions. CBRE Global Investors acquired a pair of buildings (part of a three-property national investment acquisition) in Bartlett totaling 630,982 square feet. Cabot Properties also acquired two buildings in Bartlett, totaling 459,410 square feet. Trident Capital Group and Hyper Microsystems also acquired two-building portfolios in Schaumburg and Rolling Meadows, respectively.