Vacancies are up. Net absorption is down. And new construction numbers are falling. Those are the highlights from Transwestern’s first quarter 2024 Chicago industrial report.
First, the numbers:
Chicago’s industrial market saw 2.7 million square feet of net absorption in the first quarter of 2024. That’s down from the first quarter of last year, which recorded 3.8 million square feet of net absorption.
The Chicago market’s overall industrial vacancy rate stood at 5.5% in the first quarter. That is up, jumping from 4% at the end of the first quarter of 2023.
Only 16 million square feet of new industrial development was under construction as of the end of the first quarter. Thta is down from 43.7 million square feet as of the end of the first quarter of 2023.
On the positive side, the average rent for industrial properties rose to $9.27 a square foot during the first quarter of the year. That is up from an average of $8.75 a square foot for Chicago-area industrial properties during the first three months of 2023.
Transwestern reported that the Chicago market’s direct vacancy rate increased for the fifth consecutive quarter. This increased vacancy rate was mostly due to the 5.6 million square feet of new inventory that was delivered in the first quarter, only 37.5% of which had been pre-leased.
Transwestern did make an important point in its report: While the 2.7 million square feet of net absorption is less than the Chicago industrial market has been accustomed to during the past three years, it still shows strong demand.
Transwestern did point to two areas of concern in the first quarter: First, leasing activity dropped off. Second, the Chicago market saw an increase in the amount of available sublease space. As Transwestern says, these might be early signs of the Chicago industrial market softening more rapidly than expected.
The McHenry County submarket had the largest amount of absorption in the first quarter with 1.4 million square feet. That was due largely to US Medical Gloves moving into 1.5 million square feet at 2001 N. Division St. in Harvard, Illinois.
Transwestern reported that there was only 6.7 million square feet of industrial leasing activity in the Chicago market during the first quarter, the lowest amount since 2008.
