In Q3, Chicago experienced a significant spike in the addition of commercial space, according to a recent report by JLL, with a total of 12.8 million square feet entering the market, marking the highest volume since Q1 of 1999. Not to mention, JLL expects an additional 12.6 million square feet to become available by the end of the year—75% of it being speculative. This increase in speculative completions, which have seen limited preleasing activity, has had an adverse effect on the city’s vacancy rate. The rate jumped by 75 basis points from the previous quarter, standing at 3.8% at the time the report was published.
On the bright side, net absorption remained positive at two million square feet. However, this was mainly driven by two major moves: Target occupying 1.4 million square feet in the I-80 Corridor, and Amazon moving into 700,000 square feet in the I-39 Corridor. Although asking rent did see a modest increase, rising from $6.98 per square foot net in Q2 to $7.05 per square foot net currently, Q3 leasing activity declined, dropping to 4.7 million square feet, down by more than half compared to the 9.9 million square feet leased in Q2. This weakened demand is partly attributed to the absence of new leases signed in the “big box” segment of the market during this time.

In the realm of capital markets, there were three notable portfolio sales in Q3, the most significant being the sale by IDI Logistics of a four-building portfolio measuring 1.3 million square feet in the I-80 Corridor. The buyer, EQT Exeter, acquired this portfolio for $98.9 million, or $77.66 per square foot, based on the report.
Looking forward, JLL anticipates that vacancies will increase in Q4 due to the completion of the last wave of speculative developments. Additionally, rents may also be influenced by the influx of new deliveries as landlords seek to adjust their rental rates in response to construction costs and limited vacant options.
It’s also worth noting that the manufacturing sector in the region is experiencing a surge in activity, particularly from electric vehicle battery and car manufacturers who are actively seeking sites in Illinois.