Chicago’s industrial construction market stands out as one of the strongest in the U.S., and while it’s not often that market conditions undergo significant transformation, there are now noticeable shifts in the patterns of demand.
To start, and perhaps most shockingly, lots of firms have seen a slowdown in the push for 500,000- to 1,000,000-square foot speculative buildings, with clients focusing more on build-to-suits than in years past. PREMIER Design + Build Group Senior Vice President, Midwest Market Leader Joseph Ahrens confirmed increased interest in the number of end user projects, as opposed to the boom of spec buildings, which represented a majority of PREMIER’s projects 18 to 24 months ago.
When it comes to the construction of tailored properties, there exists a distinct category of design trends, including the emphasis on sustainability and environmental, societal and governance (ESG) initiatives. More and more clients are showing interest in eco-friendly design elements like solar energy to replace or supplement electricity from a grid—PREMIER Design + Build Group has also looked into geothermal energy as a substitute for conventional gas and electric heating and cooling, driven by a concern for the volatility of fossil fuel costs, though it’s not yet being marketed to the same caliber as solar.
It’s encouraging that sustainability, along with amenities such as EV charging stations, is becoming increasingly commonplace—and while it does cost more on the back end, it can result in long-term savings for users. Ahrens said alternative energy sources like solar have made significant progress in the past decade and continue to be promoted and incentivized to attract financially cautious but forward-thinking users.
In some cases, the current cost of fuel itself has proven incentive enough. And contrary to decades past, those financing these projects are willing to spend more on the back end to ensure they will be an eco-positive contribution long term.
Another trend that’s taken a turn is the type of user demanding space. While manufacturing and e-commerce companies previously dominated the landscape, the current clientele is much more varied, as the tech, food and beverage and medical sectors are among those expanding their footprint in Chicagoland.
“There’s a lot of pent-up growth that was put off as everyone was booming through the last few years and focused on making their business work while dealing with demand and challenges like supply chain issues,” Ahrens said. “Now it seems those companies have a chance to take a breath and invest into the future of their business after experiencing such growth the past few years.”
Similarly, Ahrens said as the market has pivoted in the last few months, there doesn’t seem to be one submarket that stands out above the rest in terms of construction/leasing activity, as the firm’s current projects are representative of many, including a handful of build-to-suit, expansion and redevelopment projects, like the former Allstate Campus in Glenview, Illinois, on which PREMIER serves as the GC.
Construction of Dermody Properties’ The Logistics Campus commenced in October beginning with the first five buildings, representing over 1.2 million square feet, scheduled for completion in Q2 and Q3 of 2023; Phase II will deliver five additional buildings totaling more than two million square feet.
Despite the changing patterns of demand and the methods used to meet them, the sector is still considered one of the most robust, even amidst the ongoing recession. Ahrens said it’s a matter of perspective. The market conditions of late 2021 and 2022 established a new precedent for what is considered “normal,” but experts foresaw that it was unlikely to be sustainable long term, which has proven true by the ongoing challenges that are still working their way through the system.
“It might feel like less activity because of the volume of projects built in the last two years,” Ahrens said, “but there are a healthy number of projects that are out there and climbing.”
Of course, any discourse on industrial activity would be incomplete without acknowledging the significant role played by Amazon and the effect it’s had on the region in the last several years. As Amazon continues to curb the pace of its expansion and shift its focus to enhance the infrastructure of their current facilities, its evolving dynamics in the coming months are something to monitor, as it’s bound to have a profound impact on the overall market.