As expected, the industrial boom has continued well into the summer months, but new numbers help illustrate just how in-demand industrial building stock is in the Chicago area at the moment. According to a new report from Avison Young, the Chicago metro area has just witnessed a 20-year record low vacancy rate in the industrial segment. The Q2 2021 overall vacancy stood at just 6.4%, or nearly half of the record high of 12.3% back in 2009.
Unsurprisingly, industrial asset prices have also continued to move into new territory, reaching $80 per square foot in April 2021. Just five years ago, this figure hovered just under $60 per square foot, indicating that overall values are in lock-step with high demand and low vacancies. Investment in industrial has far outpaced other asset classes, particularly office buildings, the report illustrates. For example, there was $4.4 billion in industrial investment from the beginning of 2020 through the end of Q2 2021 in the Chicago area whereas downtown office saw just $2 billion of investment in the same period.
At the end of Q2 2021, the report shows that there are currently 220 projects — or roughly 98 million square feet — proposed, under construction, or undergoing a renovation. The southern part of Cook County is currently witnessing the most development activity with 10 projects breaking ground in recent months. Net absorption stands at 1.2% for Q2 2021, but when looking at 2020 and the first half of 2021 combined, that number increases to 3%. A whopping 12.5 million square feet of new industrial space was delivered in the first half of this year, the report highlights.
Leasing activity has remained fairly consistent in the last year and a half, though it did dip between 2017 and 2019. In 2020, 55.8 million square feet of space was leased while the report indicates that the prorated figure for 2021 is roughly 55.2 million square feet. The healthy leasing numbers are close to the 2016 high of 56.8 million square feet. And with so much demand for warehouse and distribution space, leasing is not expected to let up anytime soon.
Within the Chicago region, there are currently 15 projects under construction that will be 750,000 square feet or larger when completed. Additionally, base rents have increased by 11.7% since the start of the pandemic. Not only does the demand mean big business for industrial property developers, but the report indicates that employment in transportation, warehousing and utilities rose by over 76,000 jobs between May 2020 and May 2021, representing the second highest job growth sector in the region.
