A surge in development hit the Chicago-area industrial market during the final quarter of 2023, with 32 new buildings reaching completion, according to Colliers‘ fourth quarter industrial construction review.
The 32 new industrial buildings totaled an impressive 12.4 million square feet. This achievement marked the third-highest quarterly total ever in the Chicago-area industrial market.
Notably, a substantial portion of these newly finished projects consisted of 26 developments covering 9.4 million square feet, representing 91% of the total completed area. What’s more, these structures were erected on a speculative basis, contributing to the record-setting delivery of 33 million square feet of speculative space throughout 2023.
As of the end of December, there were 49 industrial buildings actively under construction, encompassing 17.1 million square feet. This figure reflected a significant decline from the previous six months when construction efforts were underway for 92 buildings totaling a more expansive 34.5 million square feet.
During the fourth quarter, construction began on 4.8 million square feet of industrial space in the Chicago-area market, an increase from the 2.4 million square feet initiated in the preceding quarter. However, the pace of completed projects outpaced the rate of new construction starts.
Thanks largely to the new deliveries, the vacancy rate for Chicago-area industrial space rose from 18.37% in the third quarter of 2023 to 19.8% in the fourth quarter of the year. This uptick was attributed to the near-record levels of speculative deliveries during the quarter.
Despite the increase in the vacancy rate, Colliers reported that tenants signed 31 new industrial leases in the Chicago area, covering a combined 3.4 million square feet, with four of these leases surpassing the 250,000-square-foot threshold.
As for this year? Colliers predicts that industrial vacancies will rise in the Chicago market during the first quarter of the year because of the continued delivery of new product. Colliers experts, tough, do project that industrial vacancy rates will stabilize in the Chicago market later in 2024, as the pace of new property deliveries is expected to significantly decrease.
This stabilization is further bolstered by the enduring demand from potential tenants for modern industrial facilities, indicating a positive trajectory for Chicago’s industrial real estate market.
