In spite of certain economic challenges, the demand for industrial space in the region remains robust, creating a supply shortage that will continue to influence the sector as we move into the new season—a trend especially evident in the O’Hare submarket and Central Kane/DuPage County, both highly-sought after locations for industrial space users, according to a recent press release by Brown Commercial Group.
The O’Hare submarket retains its status as a prime choice for numerous industrial businesses, characterized by limited available space. In the past year alone, O’Hare has witnessed an 8.4% increase in rental rates and, as of mid-year, maintained a low vacancy rate of 2.9%. During this period, there was a net absorption of 1.4 million square feet (msf) along with two msf of newly constructed space. Contributing to this strong performance is this year’s nearly 10% rise in freight traffic flowing through the airport. Some businesses have also shifted their distribution operations away from more congested national markets, based on CoStar research.
Brown Commercial Group Partner Trinity Scurto, SIOR, noted, “We are seeing a slight uptick in availability of industrial space in some submarkets, yet there is still strong demand and a rush to secure space. Cook County has seen a lot of activity from REITs and other investors who are purchasing properties in the 10,000 to 50,000-square-foot range to renovate and bring them back to the market. This is adding some space back to the market but is also pushing up rents and investment pricing.”
Central Kane/DuPage County
As previously mentioned, development activity in this region has been thriving, with inventory expanding by 8.2% since 2020. During the same period, five msf of additional space was introduced. The submarket presently boasts a vacancy rate of 3.5%, near its 10-year low. Not to mention, Brown Commercial Group reported that an additional 1.1 million square feet of space is expected to be completed by year-end, which could result in another increase in vacancy.
Southern Lake County
Southern Lake County has seen a noticeable increase, adding about 780,000 square feet of net absorption over the past year, a notable change from the 550,000-square-foot annualized three-year average. Attractive for its proximity to I-94 and I-294, as well as the Port of Chicago, which supports a range of manufacturing companies, Brown reported that vacancy rates have decreased over 100 basis points year-over-year, settling at a present 6%.
Chicago MSA
Overall, rent growth remains robust throughout the region, with submarkets such as O’Hare, Central Kane/DuPage County, Southern Lake County, and others all recording rent growth of 8% or more over the past year. In O’Hare specifically, rental rates surged 8.3%, reaching a record high of $10.40 per square foot.
One outlier is Northwest Cook County, where rent growth was 7.8% over the past year, just shy of the 8% or higher seen in most other submarkets.
