The Chicago industrial market is showing increasing signs of stability after several years of frenetic activity, according to the latest first-quarter 2026 Chicago industrial report from Transwestern.
And while leasing activity remains below the historic highs the Chicago-area industrial market reached during COVID pandemic and the height of the industrial boom earlier this decade, demand for warehouse and distribution space across the Chicago area remains steady.
According to Transwestern’s first-quarter Chicago industrial report, direct leasing activity totaled 16.3 million square feet during the first quarter of 2026. That represented a 10.3% increase from the fourth quarter of 2025 and a year-over-year jump of 40.7%.
But even with these steady numbers, industrial leasing activity here still trails the 23 million square feet that the Chicago market recorded in the fourth quarter of 2021, when tenant demand surged thanks to the rapid growth of e-commerce and companies adjusting their supply chains.
Some highlights of Transwestern’s report? The largest new industrial lease signed during the first quarter in the Chicago area came from Hyundai Translead, which leased 1.4 million square feet at 2200 Channahon Road in Rockdale, Illinois.
Transwestern’s report also pointed to improving fundamentals across the Chicago industrial market, especially when it comes to availability rates.
The region’s direct industrial vacancy rate fell 30 basis points during the first quarter to 4.5%. Total availability also declined, dropping to 8.6%, down 10 basis points from the previous quarter.
Sublease availability has also continued to retreat from the 10-year high it reached during the third quarter of 2023, another sign that the market is regaining balance.
The strongest absorption numbers came from the I-55/I-80 Southwest Corridors submarket, which posted nearly 5 million square feet of positive net absorption during the first quarter. Overall, the Chicago industrial market recorded 3.1 million square feet of net absorption during the quarter.
Warehouse-distribution properties accounted for the majority of that demand, contributing 2.7 million square feet of positive absorption. Manufacturing properties added another 383,517 square feet.
Not every submarket posted gains, however. The South Suburban submarket recorded the largest negative absorption total in the Chicago area, posting negative 786,200 square feet during the quarter.
Construction activity across the region has slowed significantly compared to the peak building cycle seen several years ago. According to the Transwestern report, only 1.9 million square feet of industrial product delivered during the first quarter, the lowest quarterly delivery total Chicago has recorded in a decade.
Even though industrial space under construction rose modestly to 17.2 million square feet, more than half of that pipeline, 53.6%, is already preleased, reducing the likelihood that large amounts of vacant product will hit the market.
The current construction pipeline also remains far below the 40.4-million-square-foot peak recorded in early 2023.
Rental growth has continued, though at a slower pace than during the pandemic-era industrial surge.
According to Transwestern’s first-quarter Chicago industrial report, asking rents rose 4.5% year-over-year to an average of $9.58 per square foot triple net. The report noted that rental-rate growth has moderated after the elevated increases recorded from 2020 through 2023.
Among Chicago-area submarkets, North Chicago posted the highest average asking rents at $12.93 per square foot, while Upper Northwest reported the lowest average rents at $5.77 per square foot.
