Key submarkets in the Chicago industrial market continue to surge ahead. According to Colliers International‘s research, the Chicago metro area as a whole had new leases and lease expansions of 6.9 million square of during the first quarter of 2018. The 4.5 million square feet of total net absorption is the strongest first quarter tally since 2016.
However, some submarkets continue to remain more attractive than others. The I-80 and I-55 Corridors saw net absorptions of 1.79 and 1.22 million square feet, respectively. The next largest submarket by net absorption was I-290 South, with 642,049 square feet. Meanwhile, I-290 North shed 380,007 square feet and McHenry also had negative absorption with -303,007 square feet; there is currently 1.34 million square feet under construction in the former.
What had been three straight quarters of vacancy rate rises following the completion of numerous vacant spec projects has slowed. The rate is close to matching the low of 6.59 percent recorded a year ago during Q1 2017. The usual suspect infill submarkets like O’Hare and Central DuPage continue to set record low vacancy rates while submarkets that have seen significant spec development, including the I-55 Corridor and I-80 Joliet Corridor, are witnessing rising vacancy rates.
Demand remains hot with 4.5 million square feet of net absorption in the first quarter of the year, the 24th quarter in a row this index has been positive. There are now 30 construction projects, totaling 7.2 million square feet, under construction in the area, following the delivery of 3.7 million square feet across 14 projects during the first quarter.
As this is the least amount of space under development since 2013, demand should remain strong. There were only six construction starts initiated during the first quarter of 2018 totaling 1.1 million square feet, though a new wave of development activity should start in the second and third quarters after the ground thaws.
There were 113 new leases and lease expansions between January and March 2018. The largest new lease at the start of the year saw Uline contracting 417,384 square feet in a a recently-completed, speculative facility in Pleasant Prairie, Wisconsin. DS Containers was involved in the largest user sale as the Batavia-Illinois based aerosol can manufacturer purchased its 550,095-square-foot, build-to-suit facility from CenterPoint Properties. The company had been leasing the original 299,520-square-foot building and the 250,575-square-foot expansion that was recently completed.