The North Lake County industrial market experienced steady demand over the past year, supported by positive tenant absorption and low vacancy rates. Ongoing uncertainty over tariffs and their impact on costs and business planning are creating challenges for tenants, however.
According to a market review by Brown Commercial Group, an increase in occupier demand has pushed the vacancy rate down nearly 3%, reaching 4.9% in early 2026. The submarket’s absorption rate over the past 12 months climbed to 1.3 million square feet, up from 640,000 square feet in the previous year. The submarket added just 44,000 square feet of new industrial space in the past year but there are no new projects in the pipeline, according to CoStar research.
“Tariffs are a significant issue facing industrial tenants as they make decisions on whether to renew, expand or downsize,” said Brown Commercial Group Broker Collin Tyrrell. “Even manufacturing companies that are based in the United States have exposure to tariffs through materials or parts they import, adding extra layers to their operational challenges.”
The outlook for the North Lake County submarket remains positive for 2026, with demand expected to slow in the coming quarters. This could lead to a slight increase in vacancy, but the absence of new construction in the pipeline is expected to moderate any increases.
A shortage of smaller spaces is also impacting many industrial users’ growth plans. “We are seeing a lot of interest in Lake County industrial space, but the options are limited for companies looking for less than 50,000 square feet,” said Tyrrell.
Among the other trends driving industrial activity in the Lake County market are:
- Market and economic uncertainty. While some businesses are factoring in the added costs of tariffs and general uncertainty to their business projections, there are challenged with managing costs across suppliers and production partners.
- Interest rates. Although many companies have adjusted to the “higher for longer” interest rate environment, higher rates continue to impact business financing and property sales. Many investors continue to wait on the sidelines instead of buying property.
- Challenges with space planning. Many companies took additional space during the pandemic and are now deciding whether to expand, downsize or take a short-term renewal. “Each approach has its challenges right now and companies are having to think through multiple scenarios before making decisions on their space allocations,” said Tyrrell. “Many companies are looking to expand so they don’t want to be stagnant for too long. Those that can find creative solutions and embrace the uncertainty will fare the best in today’s environment.”
The outlook for the North Lake County submarket remains positive for 2026, with demand expected to slow in the coming quarters. This could lead to a slight increase in vacancy, but the absence of new construction in the slowing pipeline is expected to moderate any increases. There is 1.68 million square feet of proposed construction announced for the next two years, however.
Brown Commercial Group, Inc. is a privately held commercial real estate company specializing in the leasing, sale and acquisition of industrial and office properties throughout the Chicago market. The firm also assists clients with land acquisition and new construction projects. The firm focuses on building relationships with clients and understanding their business model and strategic goals. As such, the firm has a strong track record of leasing and investment success within key suburban submarkets.
