Developers aren’t playing any games in this market. As it turns out, whether we’re in the sixth or seventh inning for Chicago industrial, today’s industry professionals continue to seek out locations where they can get the most hits.
The thought of having over supply tends to scare developers. After all, developers want to be able to speculate and want to find areas where demand is continuing to outpace supply.
This is what panel experts shared with a crowd of more than 325 industry professionals at the 13th Annual CIP Industrial Summit, April 29. Fundamentals in general are very strong but some concerns still linger on availability of quality sites and competition between the submarkets.
During the State of the Market discussion, panelists weren’t shy to admit that the I-55 Corridor still takes the lead as being the most active market that continues to see mostly spec development. Brian Quigley with Conor Commercial shared that it stands roughly at an 8 percent vacancy.
The corridor’s broad spectrum of customers has a big presence of automotive, manufacturing, and e-commerce companies. Quigley said there’s lots of depth overall in the submarket but it’s time to start thinking of where to go next.
When looking at areas, experts say it’s important to consider these two–drivers and demand. What is it that keeps demand in a location? A location with a transportation advantage is also a major plus. The panelists mentioned that buyers are willing to pay more for a location that has a transportation advantage.
Venture One’s Matt Goode said it’s the markets with strong tenant demand and strong investment that his firm likes most. The good news is that you don’t need to go very far to find those markets.
Cook County, as a whole, is seeing very solid tenant demand and for the first time in 15 years, there’s new speculative construction going on.
Robin Stolberg with JLL said there’s been a lot of user demand given the age of buildings in North Cook and that’s where his team sees the strongest tenant demand.
Goode, however, said he goes after opportunities in the markets that are most overlooked.
“Today, people don’t want to deal with the management side and that’s what we like, those properties that are being overlooked,” he explained.
On the management side, Dan Fogarty with Becknell Industrial said it’s the build-to-suits that he likes to chase. Becknell Industrial currently owns seven Chicago assets.
“We see continued spec from investment, corporate and local credit,” he said. “They are still operating capital and willing to do the things they need to do to upgrade business–consolidating and growing.”
Fogarty explained that a “B” product is defined differently in various geographies.
“We certainly buy what’s considered a B product and that’s what separates us,” he shared.
When asked about what the next 36 months will look like, Goode said to forget what inning it is and focus on the dynamic of online retail.
“Retail is a shrinking business so there should be a growing demand for retails to move out of retail space and into industrial space,” he explained.
Stolberg quickly backed up the claim saying that industrial users every day get more and more sophisticated.
“Today, sophistication level makes the business interesting,” he said.
Meanwhile, Quigley assured attendees that we may be in the late innings but he doesn’t expect to see a disaster coming anytime soon.