Developers can’t build fast enough.
New construction is breaking records — 12 million square feet was delivered over the past 12 months, and 4.8 million square feet was delivered during Q1 2022 alone, based on Colliers’ 22Q1 Chicago Industrial Construction Review.
Since the current development cycle began in 2013, developers have delivered 367 speculative construction projects, totaling 97.7 million square feet.
Despite the rapid pace of development, the vacancy rate in recently-completed spec product has tanked over the last few years, falling from 36.9% in Q1 of 2018 to 7% in Q1 of 2022.
Fifty-three spec construction projects were under construction at the end of Q1, and it is predicted that much of this will lease quickly as demand continues to outpace construction. There remain no signs of overbuilding, according to Colliers.
New leasing has shattered records, as well, but is expected to slow due to lack of available space.
Forty-five new leases (9.3 million square feet) were signed in recently-completed spec buildings during Q1 of 2022. This total is 17.4% greater than the previous record and greater, still, than the 2.8 million square feet of new spec product delivered during the quarter — exemplifying further developers’ inability to keep up with the current demand for modern product.
This limited supply has resulted in pre-leasing of both planned and under-construction spec projects prior to delivery.
Spec development delivered in every year between 2013 and 2021 is at least 81% leased, Colliers found, with product built in 2019 or earlier being between 96% and 100% leased. Pre-leasing has never been a concept in Chicago’s market, but it continues to grow because of the tight market.
Demand has not only been record-breaking for all size ranges of development but has been consistent across submarkets. The I-55 Corridor and I-80 Joliet Corridor submarkets have recorded 40% of the 97.7 million square feet of spec development in the last nine years.
I-55 is 98% leased; I-80 Joliet is 99% leased, according to the report.
