Chicago’s industrial market is experiencing a rebound in leasing activity and a shift toward more landlord concessions in some submarkets, according to a Fall 2026 Industrial Market Review by Brown Commercial Group.
During the past 12 months, net absorption in the O’Hare submarket totaled 1.2 million square feet, a notable increase from the negative absorption recorded a year earlier. According to CoStar research, the recovery is due to demand for logistics space, improving freight activity and occupier expansion in this critical industrial submarket. Other submarkets are also experiencing increased activity.
“After a period of softer demand, the overall Chicago industrial market has experienced an increase in activity that is expected to continue into year-end,” said Pat Crowley, Broker with Brown Commercial Group. “Heading into the fall, business leaders naturally start thinking about end-of-year planning as it relates to their industrial space and whether to move, renew a lease or buy a building.”
This increase in leasing activity coincides with more availability of space, which is starting to positively impact tenants. “There is more inventory available in many submarkets right now and we’re seeing a shift in landlords being more open to negotiating deals,” said Crowley. “Landlords are having to more actively compete for deals and some are offering more tenant improvement concessions or reductions in rent.”
Pandemic leases are resetting
Many leases signed during the pandemic are renewing, which provides an interesting view on how the market has evolved since 2020-2023. Some companies, particularly in the distribution and e-commerce sectors, are streamlining their space usage after taking extra space when the supply chain was undergoing significant disruption. “During the pandemic, onshoring increased as companies tried to keep more goods close to their customers,” said Crowley. “Today, some of that need has changed and businesses are reevaluating their space needs.”
Many tenants who signed three to five-year leases during the pandemic are going out to market now in a much different environment. Rents are higher and there is notable sticker shock for tenants. Space that was renting for around $9.00 per square foot is nowrenting in the mid-teens per square foot, forcing companies to take a hard look at their space needs.
An increase in demand has translated to a meaningful improvement in market fundamentals, according to CoStar research. The vacancy rate in the O’Hare submarket is 4.6%, down from approximately 5.7% a year ago, as positive absorption has outpaced the addition of new inventory. This shift puts the submarket in a stronger position within the overall Chicago market where vacancy is 5.4%.
Improving occupancy and renewed tenant demand continue to support positive rent growth, although the pace is more moderated than in recent cycles. Annual asking rent growth in the O’Hare submarket is 3.9% compared with 4.4% across the Chicago market.
