Chicago’s I-80 corridor absorbed 1.5 million square feet net during the first half of 2019. However, the vast majority of that—1.3 million square feet—was recorded during the first quarter of the year with only one industrial lease signed in the second quarter.
Those figures come from a Colliers International second quarter 2019 report. Is this a minor, quarter-to-quarter blip or an omen for a coming slowdown in the submarket?
The sole lease saw vehicle component manufacturer and supplier, Accuride Corporation, taking all 291,728 square feet of IDI Logistics’ latest spec building in Joliet’s Rock Run Business Park. Avison Young represented IDI Logistics in the transaction while Mohr Partners brokered the deal on behalf of the tenant.
The property, 4050 Rock Creek Boulevard, Building 14, was constructed with state-of-the-art features common to new spec deliveries in the area, such as 36-foot clear height ceilings, 1,200-amp electrical service, LED warehouse lighting, “dark-sky” compliant exterior lighting, plenty of parking and a pioneering Ductilcrete floor slab in the warehouse that eliminates up to 75 percent of the typical joints, increasing load capacity and reducing maintenance.
Though the I-80 corridor is still recording positive net absorption, the vacancy rate between April and June rose to 11.17 percent—up from 10.43 percent in the first quarter and 10.08 in Q2 2018. The solitary lease didn’t help, but the vacancy rate also increased subsequent to the delivery of two spec development projects totaling 1,010,088 square feet.
Developers may be responding to over-saturation as that is half of what was delivered in the second quarter of last year. The vacancy rate in the I-80 corridor is prone to significant adjustments due to the large size of buildings and users in the area. Surprisingly, however, it’s mostly smaller spaces that are seeking tenants.
Though the submarket is known for big box structures, the majority of available space is actually in the 30,000 to 99,999-square-foot range, according to Colliers data. The 500,000-square-foot and larger category has the next-most availability, but half that of the prior group.
The largest available spaces for lease include 1,220,140 square feet at 3300 Channahon Road in Joliet, Illinois; 1,026,000 square feet at 1023 E. Laraway Road in Joliet and 1,000,110 square feet at 24101 S. Frontage Road in Channahon, Illinois.
There are currently six buildings under construction, totaling 2.5 million square feet. Four of those projects, totaling 1.6 million square feet, are being built on a speculative basis, while the other two are build-to-suit projects.
There was only one project that began construction during the second quarter: a 137,640-square-foot spec warehouse in Joliet’s Rock Run Business Park in Joliet. Janko Group is developing the building as a joint venture with Chinese real estate development and construction company Beijing Taihua Group. This is the first phase in a planned 237,640-square-foot project that the two firms intend to develop on the 8-acre site.
Matching the single lease, Colliers only recorded one investment sale during the second quarter. CenterPoint Properties purchased the vacant, 16,000-square-foot building on 7.5 acres at 2800 Schwietzer Road in Joliet. The property is close to the firm’s CenterPoint Intermodal Center and they plan to eventually redevelop the property.
Unless the area experiences significant new leasing activity, it’s likely that the I-80 corridor will see additional vacancy rate increases over the coming quarters as the pipeline of spec developments are delivered. The authors of the Colliers report expect more large leases to sign by the end of the year, driving up absorption, and they don’t forecast the submarket’s vacancy rate to approach the 20.52 percent vacancy peak recorded in 2009.