The Chicago industrial market has undergone a significant transformation, shifting from speculative development to a build-to-suit-driven landscape, according to NAI Hiffman’s Fourth Quarter Metropolitan Chicago Industrial Pipeline Construction Report.
In the fourth quarter of 2023, speculative construction accounted for 12.7 million square feet—77% of the 16.5 million square feet under construction at that time, NAI Hiffman said in its report. Meanwhile, build-to-suit projects represented 3.8 million square feet, or 23%.
However, recent figures show a marked reversal. As of the beginning of 2025, 14.1 million square feet of industrial space is under construction, with build-to-suit projects dominating at 9.9 million square feet (69.8%), while speculative projects make up just 4.3 million square feet (30.2%), according to NAI Hiffman.
This shift reflects developers’ increasing caution. With economic pressures mounting and leasing confidence waning, many are now prioritizing tenant commitments before breaking ground on new developments.
During the fourth quarter of 2024, six new buildings totaling 2.7 million square feet began construction in the Chicago industrial market. Of these, four speculative projects accounted for 1.2 million square feet. Despite the rise in build-to-suit preferences, speculative construction has not disappeared entirely.
The sector also witnessed a sharp rise in completed square footage during the same period. Developers delivered 4.3 million square feet of new industrial space in the fourth quarter, more than doubling the 2 million square feet completed in the previous quarter. This uptick follows a sluggish second quarter in 2024, which saw a record low of just 1.3 million square feet delivered.
The contrast with earlier highs is stark. In the second half of 2023, the market experienced record-breaking completions, with 12.4 million square feet and 13.1 million square feet delivered in the third and fourth quarters, respectively. Historically, since the first quarter of 2017, the region has averaged 5.6 million square feet of new deliveries per quarter. With 9.2 million square feet projected for completion in 2025, the market appears to be trending back toward pre-pandemic construction levels.
Speculative developments outpaced build-to-suit completions in the fourth quarter of 2024, as developers finalized projects initiated in 2023. Of the 4.3 million square feet delivered, 2.8 million square feet came from speculative projects. Notably, the largest completion was Logistics Property Company’s 1.2 million square-foot distribution center in Chicago—the city’s first multistory industrial facility.
In total, Chicagoland delivered 15.9 million square feet of industrial space in 2024, NAI Hiffman reported. Speculative construction dominated these figures, contributing 12.4 million square feet, while build-to-suit projects accounted for 3.5 million square feet.
Among submarkets, Southeast Wisconsin led with 2.6 million square feet completed in 2024, followed by the I-80/Joliet submarket with 2.5 million square feet and the I-55 Corridor, which added nearly 2.0 million square feet.
The market’s evolution has been heavily influenced by macroeconomic forces. The pandemic-induced economic shock in 2020 spurred a surge in e-commerce demand, leading to a wave of speculative construction driven by historically low interest rates. However, as supply caught up with demand and inflationary pressures mounted—intensified by global disruptions such as the war in Ukraine—consumer savings from pandemic stimulus measures diminished. In response, the Federal Reserve raised interest rates, dampening confidence in the industrial real estate sector, particularly for speculative, e-commerce-focused developments.
The effect on construction activity has been pronounced. Only six new projects broke ground in the fourth quarter of 2024, bringing the total for the year to 38—a significant drop from the peak of 86 starts in 2022.
The market’s clear pivot toward build-to-suit developments underscores this shift in strategy. A notable example is CJ Logistics’ 1.1 million square-foot build-to-suit project on South Diagonal Road in Elwood, Illinois. Construction began in the fourth quarter of 2024, with completion expected in the first half of 2026.
Currently, 42 buildings are under construction across the Chicago market, with build-to-suit projects comprising 22 of those developments and speculative projects accounting for 20. However, speculative developments tend to be smaller, with only four projects exceeding 1 million square feet—all of which are build-to-suit.
This growing preference for tenant-secured developments highlights a strategic shift among developers. The trend suggests a more cautious, demand-driven approach to industrial construction in Chicago’s evolving market landscape.
