The Interstate-55 south corridor as it travels through the Chicago area is an important one for the region. A host of companies call this corridor home. When they’re thriving – and when new companies are setting up shop along this corridor – it provides a significant economic boost to the rest of the state. The good news? Adam Haefner, director of brokerage services with Darwin Realty & Development Corp., recently told Illinois Real Estate Journal that commercial real estate activity is strong along the important I-55 corridor.
Illinois Real Estate Journal: This is a broad question, but in general is commercial activity on the rise along the I-55 corridor? Adam Haefner: Activity with existing buildings is steadily continuing to improve along with the economy. Overall, activity is much better now than it was a few years ago. In the past couple of months, the activity in existing buildings of 500,000 square feet or more has slowed down a bit. The rest of market, though, is still pretty healthy.
IREJ: Why has the activity in these larger buildings slowed? Haefner: There had been a lot of transactions in that size range during the last few years, and there really is a limited number of companies looking for space that large. The number of companies looking for such space in the I-55 corridor has simply been down in last few years. A lot of those types of deals had already been completed.
IREJ: Why is the rest of the I-55 market so steady right now? Haefner: The national economy and regional economy are continuing to improve. That slow-and-steady improvement is helping. The housing market has improved substantially during the last few years. Interest rates remain low. That is helping to spur business owners to take on more risk to expand their businesses. Lenders are continuing to loosen their purse strings. That has helped with some of the smaller, privately held companies.
IREJ: What has to happen to bring even more activity to the corridor? Haefner: If things continue on the track we are on now, we will see more activity. If unemployment continues to go down and jobless claims continue to move in the right direction, we should see more interest along the corridor.
IREJ: How strong would you say the I-55 corridor is today? Haefner: If you’re looking at new development activity, I am coming up with nine spec projects that are either underway or nearing completion or breaking ground this year along the corridor. If you compare that to three years ago, there was just one project coming out of the ground. Development activity has definitely increased in the market. I am specifically talking about the south end of the I-55 corridor here.
IREJ: What type of developments are coming to the corridor? Haefner: I am looking specifically at industrial for tenants from 16,000 square feet up to 670,000 square feet. That variety lends to the health of the market overall. There is not a particular size range that developers are targeting. It’s all over the board.
IREJ: How optimistic are you about the future of the I-55 corridor? Haefner: It is a very exciting time in general. There was a long drought in development for obvious reasons when the economy was down. Now there is more optimism that the market is going to continue to get better. There are a few reasons we’ve seen. First, there is the increase in development. Also in the I-55 corridor you have gone past the recovery stage. Now lease rates are on the rise. There is some rent growth down there. That is exciting for property owners and developers. Interest rates low for the construction of buildings and carrying them once they are completed. Cap rates are extremely low for developers looing to exit projects after getting buildings leased up.
IREJ: Why is the I-55 corridor such an attractive one for developers, companies and investors? Haefner: Historically, it’s been one of the most active areas in Chicago. The location, from a transportation standpoint, is one of the better locations in the Chicago metropolitan area. It seems as if you are able to find land there and get it developed. And once you build there, you are able to get your property leased. That’s why most of the developers choose the I-55 south corridor as one of the top locations to source and purchase land.