Offering a new twist at its regular meeting, the Association of Industrial Real Estate Brokers included CH Robinson, a freight forwarder and a prominent user of industrial space in the O’Hare market in a panel discussion. The addition of the CH Robinson representative provided a balance to the insights and perspectives of two market-experienced brokers.
The discussion, featuring Ray Hurtado from freight forwarded CH Robinson, Chris Lydon from Cushman & Wakefield and Matthew Stauber of Colliers International was moderated by Liberty Property Trust’s Matt Neumann (pictured below).
“O’Hare is the gateway to the world,” Hurtado said, explaining the importance and relevance of the O’Hare market area. “And we get product all over the world.”
Lydon agreed, characterizing O’Hare as a dynamic and diverse market with the full gamut of users, ranging from manufacturing and distribution tenants to freight forwarders like CH Robinson.
“O’Hare obviously has a huge impact, with its access to all types of transportation routes and a labor pool that draws from throughout the surrounding areas,” Lydon said.
Stauber helped set the stage on the discussion of O’Hare by talking about the concentration of space in a market area that he said, “may only be 10 miles across”. He added there is great diversity in the 140 million square feet of product in O’Hare. “It is the critical mass and diversity that keeps it rolling,” Stauber said.
The panel further described O’Hare as an infill market, generally encompassing Elk Grove Village, Bensenville, Des Plaines and other areas immediately surrounding the airport. There was agreement that the market is expanding outward, but that groups like CH Robinson, among others, really can’t venture too far from the core of the market—property and facilities located on or immediately adjacent to the airport and its various terminals.
“We need to be close to the terminals, as close to the tarmac as possible,” Hurtado said. “Our goal is to be located just on the other side, as close as we can possible be.”
Hurtado said that in the freight forwarding business, it’s all about timing, with great pressure to “get in and get out as quickly as possible”. He added that it is critically important exactly where they are located, and where they are in proximity to the cargo terminals.
Congestion is a key, and the south end of the airport is very congested” Hurtado noted. Depending on which end of the airport you’re located, you could be .8, 2.8 or more than 5 miles away from where you need to be; and a few miles make a huge difference.
“Our location gives us a distinct advantage,” he added.
Hurtado reinforced the notion that time is money, especially in the freight forwarding industry. “It is critical to keep a good flow of freight and trucking to keep drivers moving and hours down,” he said. In doing so, you “meet DOT regulations, hit more deadlines and make more money.”
One a more generalized basis, Stauber talked about how the boundariy lines of the O’Hare market, as it is traditionally known, are expanding outward. He noted specifically Turnberry Lakes, a business park that he and his colleagues at Colliers market, has achieved great success because of the market’s general expansion. And the ease of access to buildings in the park.
Lydon agreed that the boundary lines for the O’Hare market are blurring. He said that some of the area that traditionally known as West Cook really is now more in line with the O’Hare market. He added that the soon to be completed expansion of 390, the market lines will blur even further.
The market isn’t without its challenges, however. One of the biggest issues for building owners and users alike in the O’Hare market is real estate taxes.
“I don’t like them,” Lydon said. “We are telling owners that they have to get creative and make it as easy as possible for users.” He said the most logical course of action is to quote gross lease rates so that users aren’t necessarily scared away because of the real estate taxes. Realistically, though “a lot of users won’t consider” certain areas because of the taxes”.
Stauber weighed in on the tax issue and noted the issues that arise when a 6B tax status is about to expire and the value loss that can be created for some assets. “That makes a difference for who will invest in an asset,” he added.
Additional takeaways from the panel discussion included:
- Significant increases in land prices, from $3.50 to $4.00 per square foot (psf) 15-20 years ago to prices that now are $20 psf and up
- There is rent growth in the O’Hare market; yes there is inflation, but there is also rent growth when you look at the total picture
- Key factors in new construction deliveries, from the perspectives of users like CH Robinson, include long and narrow buildings to facilitate flow, extra trailer parking; and anything that can keep freight moving and allow trucks, and the freight they carry, to get in and get out.
- Additional notes on new deliveries include ceiling heights that most likely fall in the 32 to 36 foot clear range, though ceiling height for freight forwarders is not really the issue because of the quick turn of product