During this impressive period of economic expansion, 2016 was a banner year for big box industrial absorption with 16.1 million square feet. Even as we get late into the cycle, there’s always the possibility of topping records as that figure rose to 17.4 million square feet last year.
Reinforcing this 2019 absorption, according to Colliers International research, were new leases and lease expansions in the newest and largest industrial buildings to come to market. Totaling 20.8 million square feet, this was also a record for the cycle.
The development of new, massive warehouses can drive up vacancy for this product type just because of the sheer amount of new space that is added. In fact, for the past few years, lagging leasing activity among buildings greater than 750,000 square feet has saddled this size category with the highest vacancy rate in the Chicago metro.
According to last year’s figures, this category’s 6.76 percent vacancy rate turned out to be the lowest as large-footprint users returned to the market. The overall big box vacancy rate decreased by 54 basis points to 8.53 percent in the Chicago area during 2019, the lowest the rate has been since Q2 2017.
Users were overwhelmingly drawn to the I-80 corridor; the 5.7 million square feet of net absorption in that submarket was good for a third of recorded net absorption across the market. These fundamentals were buoyed by the completion of several build-to-suit projects and nearly 6 million square feet of new leasing volume—the most in 2019.
Colliers helped broker the Q4 lease that saw Amazon commit to over 1 million square feet at 23714 W. Amoco Road in Channahon, Illinois. Venture One Real Estate is developing the build-to-suit project on behalf of the e-commerce giant.
The largest lease of 2019 was also in the I-80 corridor, as Target Corporation took the entirety of Rock Creek Logistics Center in Joliet, Illinois. Developed as a joint venture between The Opus Group and AEW Capital Management, the 1.2 million-square-foot industrial logistics facility features 36-foot clear height, 350 trailer positions, four drive-in doors, more than 400 parking stalls and 92 exterior dock doors.
Market-wide, supply and demand are fairly balanced at the moment. The 17.4 million square feet of net absorption during 2019 kept pace with the 17.5 million square feet of new speculative and build-to-suit big box product delivered during the year.
In addition to their Joliet facility, Target pre-leased an additional 1 million square feet of spec space at 3501 S. Pulaski Road in Chicago. Crate & Barrel and Fresenius Kabi USA each agreed to move into large, build-to-suit facilities—646,380 square feet in Romeoville, Illinois for the former and 590,525 square feet in Pleasant Prairie, Wisconsin for the latter.
Developers completed 17.5 million square feet of big box space last year, across 40 projects—the largest tally of new completions in two years. There are another 30 big box projects now underway that will deliver 12.4 million square feet to the market. Of these, 21 buildings totaling 7.1 million square feet are being built on spec.
In another record for Chicago’s industrial market, new big box leasing activity totaled 20.7 million square feet during 2019 according to Colliers research. There were four new leases greater than 800,000 square feet signed during the year, two of which were over 1 million square feet. That’s quite the turn of events from one year prior as there wasn’t a single lease greater than 800,000 square feet signed during 2018.
