The enduring strength of the Chicago industrial sector was a frequent topic during the Chicago Commercial Real Estate Forecast Conference held Jan. 24 by REjournals.
Panelists speaking at the conference, held at the Hyatt Regency O’Hare hotel in Rosemont, Illinois, predicted even better times for the industrial sector in the city and suburbs.
Why? Demand is still strong for warehouse and distribution space, with customers still expecting the products that they order online to arrive at their homes with a day or two.
At the same time, many companies are bringing at least some of their manufacturing back to the United States. This reshoring trend is providing a boost to the country’s major industrial markets, including Chicago.
Finally, Chicago is still a stop destination for industrial end users. The city is the third biggest in the country. And it is blessed with access to a strong labor force and a strong transportation infrastructure.
For all these reasons, speakers at the Jan. 24 event predicted a busy year for industrial in 2025.
John Joyce, managing director with SVN Chicago Industrial, said that the Chicago commercial real estate market is now in recovery mode after several challenging years.
And this recovery, he said, will provide a boost to the city’s industrial sector, which has remained resilient during the challenging times and is poised to thrive during the new rebound period.
“We saw a sharp dip of commercial real estate activity in ’23 and ’24,” Joyce said. “But the beginning of this year, so far, is shaping up nicely. I am optimistic about what lies ahead. I think that we are in a great space today.”
Meredith O’Connor, international director with JLL, also pointed to good news in the Chicago-area industrial sector. She predicted several big years for the local industrial sector, partly because so many companies today are bringing at least some of their manufacturing operations to the United States.
This reshoring trend will only help the industrial sector in the city and suburbs, she said.
“We are seeing the beginning of a manufacturing renaissance,” O’Connor said. “We are so excited about this at JLL. Economic development is non-partisan. Everyone supports new jobs and capital investment, and that’s what an increase in manufacturing will bring.”
Joe Rook, executive vice president of ARCO/Murray, said that though the industrial market has remained resilient, it still faces challenge.
He pointed to spec construction. This has slowed significantly, he said, and most of the projects that ARCO/Murray is now taking on are build-to-suit developments.
The good news? Rook said that he expects industrial construction activity to rise in 2025. And while spec construction might not reach the heights of 2020 and 2021, it, too, should increase at least slightly this year.
“Last year, I’d say that over 80% of our projects were build-to-suit,” Rook said. “We are seeing some signs that spec development is slowly coming back. I’d say that spec development is at the 1-yard line. It has a way to go before it is back.”
Joyce said that the Chicago market provides industrial end users with what he called an unparalleled transportation network, including the power and reach of O’Hare International Airport. At the same time, the market’s pricing is lower than what developers and investors will find on the coasts, he said.
And vacancy rates? Joyce said that his company’s metrics show that the Chicago-area industrial vacancy rate stood at a low 4.7% as of the end of the fourth quarter of 2024.
“Business gets done in Chicago by people who how to perform,” Joyce said, when summing up the appeal of the Chicago industrial market.
Rook said that Chicago’s population density matters, too. Companies want to open warehouses and distribution centers here because they can easily reach a large number of their customers.
Rook predicted, too, that Chicago will continue to see rising demand for cold-storage facilities and data centers.
“People said that 2024 was a challenging year. But that is partly because we had seen so many deliveries in the years before that,” Rook said. “If you delete 2023 from history, last year does not look like a bad year for construction activity at all.”