Economic uncertainty was a concern throughout Q3, amid high inflation and a probable recession, but according to Savills’ Q3 Industrial Report, Chicago is on track for now.
Rents across Chicagoland have increased since 2020, but at $5.40 per square foot (psf) at the end of Q3, they are still well below other markets in the U.S., like the East and West Coasts, where rents continue to be observed much higher. Vacancy also rose for the first time in over a year, but the market’s 4.8% vacancy rate still sits well below the long-term average.
That said, deliveries and new construction starts were hardly affected. Construction exceeded 33 million square feet—an all-time high—and deliveries have surpassed 28 million square feet thus far in 2022.
Much of the large-scale construction activity occurred near I-55 and Joliet, as well as in areas further out like Kenosha. One of the most notable projects in Q3 included Cherry Hill 20, a not-yet-leased (at the time of the report) 1.2-million-square-foot warehouse in Joliet’s Cherry Hill Business Park.
Despite the lasting frenzy of activity, some signs point to cracks in the warehouse boom market. For one, the recent slow of e-commerce sales.
Amazon has closed warehouses and canceled projects, including one project in Hoffman Estates, based on the report. Other e-commerce businesses, however, have rented more space in response to rising inventory levels resulting from the slowdown. Concern about the direction of the global economy has also prompted some firms to consider real estate spending commitments, which could result in the softening of demand.
Top Transactions (Leases):
- RJW Logistics: 815,000 square feet at 1701 W. Normantown Road (I-55)
- DSV Air & Sea Inc.: 307,000 square feet at 1401 Devon Ave. (O’Hare)
- Top-Line Furniture: 252,000 square feet at 1455 W. Thorndale Ave. (O’Hare)
- Mercury Plastics: 141,000 square feet at 10701 W. Belmont Ave. (West Cook)
- CAP Barbell: 100,000 square feet at 3499 S. Chicago St. (Joliet)
Top Transactions (Sales):
- Bank of America: $104.4 million; 1,000,000 square feet at 3851 Youngs Road (Joliet)
- Ares Industrial REIT: $102.5 million; 750,000 square feet at 23700 W. Bluff Road (Joliet)
- Trammell Crow: $62.3 million; 45,000 square feet at 315 N. May St. (North Chicago)
- High Street Logistics Properties: $36 million; 252,000 square feet at 1455 W. Thorndale Ave. (O’Hare)