By Vernon F. Schultz
Executive Vice President-Colliers International Chicago
Recently, Clarius Partners announced the construction of a 1,001,184-square-foot industrial facility in Clarius Park Joliet. While the economy is still reeling from the effects of the global recession of 2008 and an uncertain political future, this may seem like a contrarian bet on Chicago’s southwest primarily occupied by consumer goods distributors. However, there has been a major shift in local market dynamics that will propel this project to success. Many people have asked me, “Is this the time to build spec and will it work?” Our answer is simply, “Yes.”
In 2009, there were four buildings that could accommodate tenant requirements of more than 850,000 square feet. Today, there is only one. That is Clarius Park Joliet Building 1.
In looking at historical tenant demand trends, we found that there have been 30 deals completed since 2001 by users with requirements of more than 750,000 square feet. Of these transactions, 11 have been slotted into either speculative or existing buildings, 13 users have had buildings constructed for them in build-to-suits and the remaining six deals have been renewals. While on the surface these statistics indicate users prefer build-to-suit opportunities, this analysis does not account for the years between 2001 and 2004 when there were no modern existing or speculative buildings of more than 750,000 square feet that had the ability to accommodate these requirements. Since 2005, 11 large tenants went to existing buildings and seven completed build-to-suit transactions. Additionally, two large build-to-suit deals should be noted — Clorox’s 1.35 million-square-foot building that was completed in University Park in 2011 and Home Depot’s 1.6 million-square-foot facility completed this year in Joliet built because there were no speculative developments of that size to accommodate those users.
More importantly, we have recently seen the metrics of the I-55 and I-80 Corridors return to pre-recession levels. According to the Colliers International Industrial Market Report, the combined vacancy rate in the two markets following the 2012 second quarter report has fallen to 12.57 percent.
The historical market metrics also indicate that it is time to begin speculative development in the I-55 and I-80 Corridors. These are the only two submarkets in Chicago that have had positive absorption every year since 2002. Additionally, there has only been 3,580,170 square feet of new supply since 2009. The two submarkets averaged 7.9 million square feet of new construction per year in the period between 2002 and 2008.
The I-55 and I-80 Corridors’ resurgence has been dramatic over the past four years. Aided by a lack of new construction and positive absorption, the combined vacancy rate for the submarkets has dropped to 12.57 percent following the second quarter Colliers International Industrial Report from a staggering high of 17.93 percent at year-end 2008. This is the lowest combined vacancy rate since the two submarkets hit 11.51 percent in 2002. Even more impressive has been the staggering drop in the I-80 Corridor’s vacancy rate, which hit a high of 19.64 percent at year-end 2008.
With that in mind, Clarius Partners is currently developing the next generation of speculative development in the I-80 Corridor with its 1,001,184-square-foot facility at Clarius Park Joliet. Clarius Partners is a full service real estate investment and development company founded in 2009 with headquarters in Chicago and a development office in Tempe, Ariz. Clarius is currently developing or managing more than 690 acres of industrial, office and medical projects in Illinois, Pennsylvania, Arizona and California with 10.3 million square feet of development potential and a combined overall development budget exceeding $730 million. Needless to say, Clarius Park Joliet is one of the firm’s marquee projects.
Clarius Park Joliet is located in the southwest corner of Joliet, south of U.S. Route 6 and east of I-55. The site has the distinction of being located in-between the BNSF LPC and the UP Global IV intermodal yards (less than seven miles) and the I-80/I-55 interchange (less than five miles.)
The park is fully subdivided and “pad-ready” with existing approvals, utilities, mass grading, detention and access. Infrastructure work completed to-date includes: overall mass grading of approximately 86 acres, the construction of two detention ponds, common-area landscaping, the extensions of a 12-inch water main, 12-foot sanitary and natural gas within the park, and relocations of ComEd and AT&T utility services within the park.
Building 1 is a 1,001,184-square-foot facility designed to meet the high standards of regional distribution users. The building will feature 32-foot clear ceilings, 50-foot by 52-foot bays with 75-foot staging bays, 120 exterior docks (expandable) and 240 trailer parking spaces (expandable.) I, along with Dominic DeRose, am marketing the project on behalf of Clarius Partners and we have established an asking rate of $3.35 per square foot net. For more information, contact me at [email protected]
