It is no secret that over the past four years, Chicago’s industrial real estate market has seen an increase in demand and activity, specifically in the metro Chicago markets centralized around its heartbeat, the O’Hare submarket. Chicago’s most desired submarket has been at a stalemate 4 percent to 4.5 percent vacancy for the last couple of years, down from a near 11 percent back in 2011.
The lack of available product has tested CRE brokers’ creativity and patience as they scour the market for a client’s suitable facility solution. This is not a bad problem to have, as many within the industry have grave memories of what demand was like during the most recent “Great Recession.”
So, what happens when a company has outgrown its current facility yet the lack of product doesn’t provide an immediate or obvious solution? Businesses and industrial real estate brokers alike must think outside the box when searching or presenting space solutions. Over the past year, we’ve seen a multitude companies entertain the idea of relocating to unfamiliar submarkets, not because it’s a new desired location, but because their preferred submarket has very little availability. This has commonly led industrial submarket specialists into submarkets that they may never have worked in before.
In addition to being forced into unfamiliar markets to present applicable space solutions, industrial real estate brokers are forced to get extremely creative with the existing product to fulfill requirements. Retrofitting buildings is becoming a common exercise in today’s market. Improving a building has gone beyond the standards of updating paint, carpet, lighting, etc. We are now witnessing complete renovations of an existing building’s infrastructure to comply with a company’s requirement, such as adding employee parking, trailer parking, adding/removing office space, raising roof clearance, adding truck docks/drive-in-doors, upgrading power, etc.
Although speculative construction deliveries have supplied millions of square feet to many of Chicago’s suburban industrial submarkets, many of these facilities cater to tenants with more than 50,000 square feet of space requirements. This leaves smaller tenants to fight over second-generation space on which we have often seen multiple offers or RFPs. This, again, proves that the tight market presents the need to expand search geographies and the need to get creative when presenting available facilities.
A recent example of this was our small logistics client that had a requirement for 15,000 to 20,000 square feet, seeking space in the O’Hare submarket. The tenant was interested in 18-feet or greater ceiling clear, a truck maintenance bay and parking for 15 truck trailers. After weeks of searching our databases, utilizing the AIRE “searching for” e-blast tool, and scouring for off-market opportunities, our efforts yielded few choices. So we had to get creative when presenting a facility.
We showed the tenant a building that was 16-foot clear, 35,000 square feet, with a large landsite and zoning that allowed for trailer parking/truck maintenance in the North Kane/I-90 Chicagoland submarket. We explained to our client how the larger building could accommodate more floor area for storage, lessening the requirement for higher ceiling clearance, the extra land space could be paved for trailer storage and the maintenance bay would have to be added, but would comply with zoning. The creative nature of presenting this with a mock floorplan and rough sketched land survey led to our client’s accepting of the property as a space solution in an unfamiliar submarket.
Understanding your client’s facility, infrastructure, and use requirements is critical when presenting new space solutions. Whether upsizing or downsizing, brokers and businesses alike are looking at unique and often unfamiliar solutions to accommodate their commercial real estate needs in today’s tight market. It has now become a common practice for brokers to venture outside of their and their client’s “territory” and think outside of the box to accommodate client requirements.
As members of Entre Commercial Realty in Arlington Heights, Illinois, Cory Kay and Mike Deserto focus on business development for the teams of Dan Jones, Dan Benassi and Mike DeSerto. Cory and Mike are responsible for the sales and leasing of industrial properties in the Cook, Kane, McHenry and Lake county markets. They are members of the National Association of Realtors (NAR), Schaumburg Business Association, and Elgin Area Chamber.
