The third quarter vacancy rate for the O’Hare corridor continued its dramatic improvement, with a 64-basis-point decline from the second quarter rate of 7.64 percent to 7.0 percent, according to Colliers Q3 Chicago Industrial Market Overview.
Michael Powers, vice president of industrial investment at Molto Properties, said that the first three quarters for the O’Hare corridor were good.
“Colliers’ report showed that the availability of supply is less than 10 million square feet,” Powers said. “We haven’t seen that in a couple of years, and in particular some bigger deals are getting done. So from O’Hare, that’s over 100,000 square feet. There have been some users that have taken down larger chunks of space, and that’s really driven the vacancy rate down.”
Powers noted Molto has land in Franklin Park on the east side of Chicago O’Hare International Airport, and that they have seen more activity themselves on that side of the airport since the beginning of the year.
“I wouldn’t necessarily call it a flurry of activity, but we have definitely seen a lot more activity there than, for example, the I-80 corridor where we’ve got some vacancies,” he said. “So it’s encouraging because it all starts with activity and inquiries, and we’ve seen that in O’Hare turn into deals, like the Ceva Deal for example. I know there were a couple of users looking at the building Ceva took. So you have to figure that those guys are going to end up somewhere else, and that’s just going to continue helping the market absorb space.”
Ceva Logistics leased 208, 406 square feet at 1925 Busse Road in Elk Grove. For the corridor, the third quarter leasing volume total of 1.2 million square feet, according to Colliers, was a 13.9 percent jump from the second quarter level of 1.1 million square feet. The third quarter’s increased activity was driven by tenants leasing spaces over 100,000 square feet, and there were four such leases signed in the third quarter, whereas there was only one in the second quarter.
“I think the rest of the year is looking pretty positive,” Powers said. “Going back again to some of the bigger spaces out there, just based on the activity we’ve had in Franklin Park, and units that are floating around, I think you’re going to see some larger spaces get absorbed.”
Powers also thinks there are some decent sized renewals that are going to take place as well. “My expectation is that through the end of the year, you are going to see a continued reduction in the vacancy rate, and more positive net absorption.”
Looking towards the New Year, Powers thinks it’ll be very interesting because there are a couple of projects being built and completed in 2015.
“Liberty’s got their project in Des Plaines,” he said. “We plan on breaking ground next spring on a 367,000-square-foot building, and I know there’s still some land that is developer controlled in the sub-market that will either have back, or build-to-suit, activity on it as well.”
Liberty Property Trust has already begun building a 289,900-square-foot manufacturing plant at 333 Howard Avenue in Des Plaines, and will replace it with a 235,800-square-foot speculative warehouse/distribution facility. The building is set for completion the second quarter of 2015.
“As long as we continue to see good demand in the market, I think you’ll see another good year in O’Hare, Powers said.”