Nothing new here.
Industrial in Chicago demonstrated near-record leasing volume and insatiable demand in Q1 of 2022, the overall vacancy rate dropping to 4.91% — the lowest rate ever recorded. Despite the record low vacancy rate, demand totaled 11.7 million square feet during Q1.
When will industrial cool off? That’s the big question, and though there’s no definitive answer, Colliers’ Chicago 22Q1 Industrial Report provides a closer look at what to expect throughout the next few months.
Vacancy rates reached an all-time-low in five submarkets, a few of which are around or below 2%. The problem, therefore, is the lack of available space.
Users are competing for buildings and spaces, driving up sale prices and lease rates. Combined with the tight market, Colliers expects both to continue to increase at an unprecedented pace. Limited supply has also caused an uptick in pre-leasing of planned or under construction spec projects prior to delivery.
Good news for tenants? Developers are still building. Forty-five new leases, or 9.3 million square feet, were signed in recently completed speculative buildings during Q1. This is 17.4% greater than the previous record, but the near-empty market will result in muted new leasing activity and net absorption until much of the under-construction product is delivered, based on the report.
For Chicago North and Chicago South submarkets in particular, Colliers found that Q1 saw a decrease in vacancy rates (Chicago North, 6.79%; Chicago South, 10. 38%) because of the submarkets’ positive net absorption.
Net absorption for Chicago South totaled nearly 315,000 square feet (the strongest of all submarkets) while that number for Chicago North was much lower at about 96,500 square feet.
No buildings were delivered during Q1, but four new leases and two lease expansions totaling 429,435 square feet were signed between the two submarkets, the largest involving the short-term expansion of NP Fresh, LLC into a recently developed building by NorthPoint Development.
Colliers forecasts that users looking for 100,000 square feet or more of modern space in Chicago North or Chicago South have two options, one of which is under construction. Spec facilities are continually being built to meet demand, and many projects are in progress.