According to Savills’ 2023 Q2 Industrial Market Report, Chicago’s market has recently showed encouraging signs of balance, as vacancy rates continued to rise for the fourth consecutive quarter, now 4.7%. This, of course, makes sense, given uncertainties in demand and higher interest rates, yet the construction pipeline remains robust.
Notably, Savills reported that sublease supply witnessed a remarkable surge, especially within O’Hare, with six subleases exceeding 100,000 square feet coming to market in the past five months.
Another trend was landlords demonstrated flexibility in offering attractive concessions such as TIAs, in a bid to entice potential tenants. However, landlords might eventually reevaluate their pricing strategies, as, even with the offered concessions, available spaces seem to linger on the market.
Leasing activity experienced a notable decline of 48% compared to the previous year, hinting at what may be the start of a shift in the supply-and-demand paradigm.
Capital markets in the region also faced a notable slowdown during the period, stemming from investors and sellers struggling to align their valuations and leading to a temporary pause in several transactions. Nevertheless, amidst the sluggish market, a few notable deals stood out, including Bank of America’s acquisition of a 605,000-square-foot distribution facility in Aurora, leased to Ryder Logistics, for $55.5 million, or $92 per square foot.
As the market continues its journey towards normalization, navigating various challenges, stakeholders must remain vigilant and adaptable to embrace the evolving landscape effectively.
Read the full report here.
