As 2024 draws to a close, brokers in Chicago’s industrial real estate market are evaluating the year’s performance and looking ahead to 2025 with measured optimism. The market, defined by its resilience and adaptability, continues to attract tenant and investor interest, albeit with evolving preferences and cautious planning. Whether through speculative developments, sustainable innovations or renewed manufacturing demand, 2025 promises to be a year of opportunity for the Windy City’s industrial players.
The Chicago industrial market reported a 4.3% vacancy rate in the third quarter, down slightly from the previous quarter, according to CBRE. Average asking rental rates rose to $8.11 per square foot. Net absorption rebounded to 3.5 million square feet, up from 2.1 million square feet at mid-year, though year-to-date figures remain 37% below 2023 levels. Developers delivered 4.4 million square feet of new supply, while construction activity slowed to 10.2 million square feet in response to economic uncertainty and inflation.
“We’ve seen softening demand, with new leasing down 25.7% year-over-year through the third quarter,” Sean Henrick, Vice Chair at Cushman & Wakefield. “Tenants are delaying decisions and seeking flexibility in lease terms, anticipating a more stable market in 2025.”
Chicago’s industrial sector remains underbuilt relative to demand, creating a dynamic market with strong fundamentals. Brokers point to several high-demand subsectors—cold storage, logistics and manufacturing—that are expected to drive leasing activity in 2025.
“Cold storage demand will remain strong, with strategically located speculative projects likely to perform well,” said Jerry Sullivan, Principal at DarwinPW Realty. “We also anticipate a resurgence in manufacturing demand, particularly for properties equipped with heavy electrical power and infrastructure suited for AI-driven industries.”
Sustainability is another critical factor reshaping tenant requirements. Companies are increasingly prioritizing energy-efficient designs and carbon footprint reduction.
“Sustainability is more forefront and will continue to grow in importance,” noted Adam Roth, Executive Vice President at NAI Hiffman. “We’re seeing CO2 savings measured by location becoming a key metric.”
Submarkets with proximity to major transportation hubs and skilled labor pools continue to thrive. Brokers consistently highlighted areas like O’Hare, the West Suburbs and the I-55 and I-80 corridors as hotspots for tenant activity. The demand for smaller speculative developments is also on the rise, driven by limited availability of large tracts of land.
“Developers are building smaller speculative buildings, some as small as 28,000 square feet, particularly in infill markets like O’Hare,” said Cal Payne, Executive Vice President at CBRE. “This shift reflects the need to maximize underutilized spaces while meeting tenant demand for centrally located sites.”
Submarkets outside Cook County are also gaining traction. Henrick observed renewed interest in northwest Indiana and the DuPage area, citing these regions’ regulatory and cost advantages.
Despite a softening in coastal markets like the Inland Empire and New Jersey, Chicago remains a stable, sought-after market for industrial real estate investment. Its central location, robust infrastructure, and skilled workforce position it as a linchpin in the national industrial landscape.
“Chicago’s adaptability and unmatched transportation systems make it ultra-competitive nationally,” said Mike Hawryluk, Managing Principal of Industrial Brokerage Operations at ICG. “We’re seeing increased demand in corridors like I-88, I-55 and I-80, where investments in infrastructure support future growth.”
With a more stable debt market and declining construction costs, industrial speculative development is expected to pick up in 2025. Brokers anticipate healthy rental rates for high-quality assets, while vacancies may edge higher due to new supply.
“Occupier demand is expected to normalize, and rental rates for Class A properties will remain strong,” said Matt Mulvihill, Vice Chairman at CBRE. “We’re also seeing investor optimism for long-term fundamentals, particularly in markets with high absorption rates.”
The election’s conclusion could also spur activity.
“With some uncertainty behind us, we anticipate companies that have delayed decisions will move forward in 2025,” Henrick added.
