Don’t expect many new industrial developments to pop up in the Chicago area during the rest of 2024. Colliers reported that the pipeline of new industrial projects in the Chicago market fell in the first quarter of this year to its lowest level in nearly six years.
This means that users looking for new warehouse or distribution space in the Chicago area this year might struggle to find existing space that meets their needs.
That’s one of the big takeaways from Colliers’ first-quarter 2024 Chicago industrial report released earlier this week.
As of the end of March, 40 industrial buildings were under construction in the Chicago market, according to Colliers. These 40 buildings totaled 12.5 million square feet. That’s not a lot of new industrial space, and marks the third consecutive quarterly decrease in the market’s industrial construction pipeline.
For comparison’s sake? Nine months ago, construction was ongoing on 92 buildings that totaled 34.5 million square feet.
Other key results from Colliers’ research? During the first quarter of 2024, 19 new industrial buildings totaling 6.6 million square feet completed construction in the Chicago market. Of these developments, 14 projects totaling 5.5 million square feet, or 84% of the total square footage, were constructed on a speculative basis.
This marked the lowest figure for speculative deliveries since the second quarter of 2023, Colliers said.
Despite the slowdown in new construction, the industrial vacancy rate in the first quarter for newly finished speculative buildings still increased, rising from 19.8% to 20.58%.
For the second consecutive quarter, though, the vacancy rate in new speculative construction increased at a slower pace. Colliers said that this might mean that the vacancy rate could be approaching its peak. After 33 million square feet of speculative product delivered in 2023, limited speculative product remained in the development pipeline at the end of the first quarter.
Tenants signed 20 new leases totaling 2.7 million square feet in recent spec product, including eight new leases between 100,000 and 200,000 square feet, in the first quarter. If leasing in modern facilities picks up, the vacancy rate could begin to decline as soon as next quarter, predicted Colliers.
