Construction starts and deliveries are down in the Chicago market for the first quarter of 2018. However, Colliers International’s Chicago Industrial Construction Review outlays a switch from greenfield to infill projects that should help buoy development.
There are currently 30 projects under construction, representing 7.2 million square feet. That’s a 61 percent drop from the same time one year ago when 18.3 million square feet were under construction. The last time so little space was under construction was during the second quarter of 2013, when 4 million square feet was underway.
New deliveries were also slow, as the first quarter of 2018 has seen 3.7 million square feet of completed space across 14 projects—the least amount of new supply since the 3.3 million square feet delivered in Q3 2016. Ryan Companies delivered the largest completion this quarter: a 1.25-million-square-foot, highly-specialized, build-to-suit facility for Swedish furniture company IKEA in Joliet’s Laraway Crossings Business Park.
While construction starts continue to drop (there were only six in this first quarter), Colliers expects a new surge of development in the next 6 months. The largest construction start for this quarter is a 355,199-square-foot speculative facility by First Industrial Realty Trust. Known as the First Joliet Logistics Center, the building is at the intersection of Route 6 and Houbolt Road in Joliet, Illinois.
Of those 30 projects under construction right now, redevelopment of already largely-developed sites accounts for 17 projects. This is the greatest number of active infill projects being developed at one time during the current cycle. Greenfield development, or the development of new facilities on vacant land typically previously used for agricultural use, has been very popular during the current cycle. At this stage, however, only 13 of those developments under construction are greenfield projects.
A new surge of development activity is expected to begin over the next six months with an estimated 13 million square feet over 50 projects to begin construction during the second and third quarters of 2018. Colliers expects that at least 20 of these will be infill projects.
Colliers also predicts a shift in project size. The Rock Creek Logistics Center in Joliet, a 1.2-million-square-foot spec project being developed by The Opus Group, was the largest building under construction during the first quarter. Average development project size grew every year between 2014 and 2017, approaching 300,000 square feet for both speculative and build-to-suit projects last year.
However, the average project size has decreased by about 23 percent for under construction projects and planned buildings expected to begin construction during the next 6 months. This is largely due to infill development becoming more prominent. Infill construction projects tend to be smaller in size due to land constraints and the demand for big box spaces in infill markets being limited.