By now, reporters covering industrial real estate probably sound like a broken record — if you missed it the first few times around, we’re here to indicate yet again that the industrial real estate market in the Chicago area continues on a red hot streak. While the reports over the last few months have some variation in terms of the exact geography covered, the timeframe that is taken into consideration, and other discrepancies related to methodology, the aggregate has always pointed to the same conclusion, which is, yet again, that the industrial market is very strong.
Reports from April showed that demand for spec industrial is outpacing supply, while a report in May showed that industrial rental rates continue to increase despite the pandemic conditions, and now Avison Young has offered a quick and simple illustration at just how much industrial values have risen in a short period. According to a recent Data Bite report from the CRE giant, the volume of investment in Chicago-area industrial has increased 115% just in the last year and a half.
Even more impressive is when the volume of industrial investment is compared to office investment in Chicago’s downtown and the suburbs. There’s a stark difference between the rates of investment the different asset classes. In the last year and a half volume is down on Chicago CBD office by 11.5% while the overall suburban market has fallen a whopping 61.8%. Not only does this indicate, like reports have been suggesting, that competition is fierce within industrial, but it also illustrates that the industrial market has moved beyond the pandemic downturn.
Here’s what the report mentions in regards to industrial performance:
Compared to the 5-year average for the sector, capital on assets was deployed at a rate 15.7% higher than the norm. This surge to the industrial sector approached $4.3 billion since 2020. It also translated into higher valuations for Chicago industrial assets, with a 13.3% higher per square-foot rate than the 5-year average, to $86/sf in the first half of 2021.
Avison Young Sightlines
As industrial leaders in the Chicago have previously expressed, the industrial sector has been a major benefactor of the e-commerce push and the increase in digital orders during the pandemic. Combine this trend with the fact that there’s just so much capital available and borrowing rates are very low, it’s further fuel for the Chicago area industrial sector’s red hot bull run.
