Chicago’s industrial real estate sector continues to thrive, with strong leasing and absorption pushing the vacancy rate down past pre-recession levels to 6.1 percent, according to Avison Young statistics from Q3 2016.
“Demand for industrial space remains strong, as companies continue to expand and look for new ways to reach their target market,” said Greg Rogalla, research analyst for Avison Young’s Chicago region. “This is creating a demand across the board for facilities that can support e-commerce, warehousing and general distribution.”
Corridors Seeing Strong Interest
One submarket of particular interest is the I-80 East Corridor, which totaled 1.4 million square feet of absorption in the quarter, a 97 percent increase year-to-date. The South Chicago submarket saw new absorption jumping 484 percent year-over-year to 498,000 square feet. The I-55 corridor also experienced strong demand, pushing net absorption up 23 percent year-over-year to 883,000. Throughout the Chicago area, net absorption was 6.8 million square feet, a 3.4 percent increase year-over-year.
As space is absorbed and demand continues to grow, landlords have started pushing rents higher. The average price per square foot was up to $4.62 in the third quarter. The biggest year-over-year increases were the I-90 East Corridor, East DuPage and Lake County, where increases were 10 percent to $6.22 per square foot; 4 percent to $5.71 per square foot; and 2 percent to $5.51 per square foot, respectively.
Construction Overview
Construction activity also was strong in Q3, with more than 6.1 million square feet of new space being delivered; an additional 18.5 million square feet was under construction. This increased the rate of completions and projects in progress by 52.7 percent and 46.4 percent year-over-year.
The I-80 corridor, I-55 corridor and Southern Wisconsin submarkets continue to record the most product under construction, — a combined 11.8 million square feet.
The largest of these new projects is a 1.3 million-square-foot build-to-suit for Mars/Wrigley at CenterPoint’s Intermodal Park in the I-80 East Corridor. Amazon also broke ground on a new 856,000-square-foot facility in the same area. The largest speculative project to break ground this quarter was the Core5 Logistics Center, also located within the I-80 East Corridor. That project will add 1 million square feet to the market.
