Conditions are improving in the I-55 Corridor after a strong second quarter in terms of vacancy.
Swift user demand caused the I-55 Corridor’s vacancy rate to decline an astonishing 143 basis points from 11.12 percent posted in the first quarter to 9.69 percent in the second quarter, according to a market research report by Colliers International. This marks the highest quarterly decrease of any submarket in the second quarter.
The Colliers report noted that second quarter vacant industrial supply measured 7.2 million square feet, a dramatic reduction from the 8.3 million square feet available in the prior quarter. This is only the second time since 2004 that the I-55 Corridor’s available industrial supply fell below 8.0 million square feet.
The I-55 Corridor benefited from the absorption of several large blocks of space during the second quarter that drove the second quarter volume to 2.0 million square feet, the Colliers report stated. This was more than twice the 753,800 square feet leased in the first quarter.
The largest second quarter lease signed in the entire metropolitan Chicago area occurred in the I-55 Corridor, according to Colliers. A large contract packager leased 532,600 square feet of bulk warehouse/distribution space at 1001 Crossroads Parkway in Romeoville. The company is expanding operations within the Chicago area.
Trevor Ragsdale, Jones Lang LaSalle’s managing director and head of industrial brokerage for Chicago, said the I-55 Corridor often attracts a great deal of lease activity.
“Most of the time, we’re seeing 350,000 square feet-plus as the largest lease activity in that corridor, or in any given corridor historically,” he said.
Colliers pointed out that second quarter sale volume in the I-55 Corridor measured 301,800 square feet, eclipsing the meager 24,000 square feet reported sold in the first quarter. One year ago, sale volume reached 301,600 square feet in this market.
A local recycler’s purchase of a 160,000-square-foot crane facility contributed more than 50 percent of all second quarter sale volume. The building, located at 13543 S. Route 30 in Plainfield, was sold in May.
Ragsdale said conitions in the I-55 Corridor are improving in the second quarter.
“It started out with a bit of a slow pace through the first quarter, but then so far in the second quarter, there’s been quite a bit of activity,” he said.
Ragsdale pointed to three significant lease transactions as examples of an improving market. Bottled water company Absopure committed to 367,999 square feet in a building owned by Prologis at 10220 Werch Drive in Woodridge. Sleepy’s also took 307,624 square feet in a DCT-owned building at 99 N. Pinnacle Drive in Romeoville. And in the largest of the three leases, a private food packaging company leased 532,560 in another Prologis building at 1001 W. Crossroads Parkway in Romeoville.
“Those are three big deals that have essentially absorbed all of that negative absorption from the first quarter,” Ragsdale said. “We’re kind of back to where we were. The submarket corrected itself pretty quickly.
“I think we’re kind of bumping along,” Ragsdale added. “There is not a tremendous depth to the tenant activity in the market. There are some big deals that are out there that are looking for space. But I think in general we’re starting to see a healthy recovery in the submarket and we’re starting to see rents increase.”
Ragsdale said there is a considerable amount of activity from packaging, food distribution and consumer products companies.
“We’ve seen a lot of interest in the market on behalf of food companies or companies that are in some way related to the food industry,” he said.
In terms of construction, one new construction project was delivered in the I-55 Corridor in the second quarter, according to Colliers. MacNeil Automotive completed a 46,000-square-foot addition at 510 Woodcreek Drive in Bolingbrook and now occupies 99,000 square feet. Conversely no buildings were completed last quarter, which was the same result that occurred during the same time period one year ago.
Three speculative projects broke ground in the second quarter in the I-55 Corridor, which will increase I-55 Corridor’s industrial base by 410,500 square feet when completed, the Colliers report noted. The speculative projects are HSA Commercial/Industrial Income Trust’s 180,000-square-foot facility at Park 355 in Woodridge and Panattoni Development Company’s twin 115,200-square-foot properties, each at Territorial Business Campus in Bolingbrook.
Additionally, Colliers pointed out that Orbus Exhibit and Display Group hired Conor Construction – a member of the McShane Companies – to construct a 347,400-square-foot build-to-suit property at Union Pointe Business Park in Woodridge. This development is expected to break ground in the third quarter.
Patrick Shannon, director at ML Realty Partners, said the transportation and shipping industry is prompting a demand for modern buildings that are better designed.
“There hasn’t been a lot of spec development over the last few years. There is pent-up demand for newer spaces with secure truck courts and dedicated trailer spots,” he said.
Shannon said many companies are looking for well-located buildings along major thoroughfares as well as buildings that have ample clear heights. He also said businesses want the ability to expand.
ML Realty Partners has 228 acres at its Heritage Crossing Corporate Center at I-355 and 143rd Street in Lockport, according to Shannon. The park will consist of 12 buildings varying in sizes from 65,000 to 485,000 square feet.
“At 228 acres, we can do 2.6 million square feet of new, state-of-the-art distribution product along the I-55 Corridor,” he said. “We think we’re in a great position along the corridor to provide users with new buildings, less congestion and ample room for trailer parking.”