Depending on which industrial real estate metrics you follow, 2020 could pass as a continuation of the previous year’s performance. This has been a year unlike any in living memory, of course, and 2019’s bull market has evaporated. Even so, the Chicago industrial market presses on.
Vacancy across the Chicago metro stands at 6.1 percent, according to the latest figures from JLL. And while e-commerce has been the buoy lifting up the industrial sector in the face of the pandemic, manufacturing space actually recorded tighter vacancies in the third quarter with 3.6 percent, compared to the 8.1 percent among warehouse and distribution product.
That is due, in large part, to the numerous spec warehouses that began prior to the pandemic and have recently come to market. With year-to-date deliveries standing at 17.9 million square feet, the MSA may surpass last year’s 22 million square feet of completed industrial construction.
There are currently 19.7 million square feet of industrial construction now underway. Of this, 4.2 million square feet are in the I-80 Corridor, such as big box speculative development projects by Elion Partners and Clarius Partners.
In Vernon Hills, Illinois, Panattoni Development has begun moving earth in preparation for the $100 million South Lake Industrial Center. Located on the former site of the Darling Farm, west of Milwaukee Avenue, the project will feature four speculative buildings when complete, totaling over 904,000 square feet. Cushman & Wakefield is marketing the property for occupancy.
The Chicago market absorbed 4.2 million square feet during Q3, according to JLL, lower than what the area recorded in the second quarter. So far this year, the Chicago region has absorbed 15.8 million square feet of space. The majority of this was in the warehouse and distribution segment, which has seen 12.2 million square feet of absorption thus far in 2020.
Despite that quarter-to-quarter dip, that 15.8 million square feet in absorption topped out the figures for Q3 2019. Chicago is currently on pace to meet—if not exceed—last year’s total annual absorption of 17.85 million square feet.
The largest new lease recorded during Q3 was General Motors’ long-term commitment to 1,026,000 square foot at Core5 Logistics Center, located at 1023 Laraway Road in Joliet, Illinois. Equally as large, the most notable renewal of the quarter saw DSC Logistics opt to remain in their 1,027,072-square-foot space at Prologis’ 1705-21707 W. Mississippi Avenue in the Elwood Intermodal.
Looking ahead, the steady transaction velocity—such as McKesson Corporation’s 570,000-square-foot cold storage lease in Manteno and numerous other industrial leases in the greater O’Hare area and elsewhere—signal that industrial users haven’t been deterred by the economic impacts of the pandemic. The 2.6 million square feet of new space that Amazon has announced for the area should signal to other industrial users that Chicago remains a strong industrial market.