Chicago has seen a spate of large, spec industrial facilities tilt up in the past year. Now they’re leasing up. While big box projects throughout the region have begun to find users, the situation is a bit slower in the I-80/Joliet Corridor.
Following significant leasing, Chicago experienced the lowest vacancy rate among big box product in almost two years, according to a new report by Colliers International. For big box buildings (those larger than 200,000 square feet), the vacancy rate went down last quarter to 8.53 percent—a 54-basis-point decline.
That is the lowest vacancy rate for this building type since the second quarter of 2017. In the I-80 Corridor, however, the big box vacancy rate stands at 13.9 percent. That’s more than double the overall vacancy rate of 6.9 percent for big box properties outside of the I-80 Joliet Corridor.
There are approximately 88 big box buildings in the I-80 Corridor, totaling 58.8 million square feet—more than any other submarket in the Chicago region. There have been several gargantuan developments greater than 700,000 square feet in the submarket this cycle, many of which remain vacant.
Four of the five largest big box available spaces for lease are in the I-80 Corridor. Three of those—Rock Creek Logistics Center in Joliet, Core5 Logistics Center in Joliet and Crossroads 55 in Channahon—are over 1 million square feet in size.
Already the largest industrial market by inventory square footage, the I-80 Corridor has another 3.2 million square feet now under construction. The I-55 Corridor is keeping pace, however; its 2.9 million square feet of construction will keep it in second place when added to the 58.1 million square feet already in place.
It’s not all gloom for the submarket, however. Though its vacancy rate remains one of the highest in the market, the I-80 Joliet Corridor did see the most improvement during the first quarter of 2019. Net absorption, which totaled 1.3 million square feet, pushed the submarket’s big box vacancy rate down 182 basis points. That absorption was good for a third of the entire metro’s total last quarter.
Elsewhere in the Chicago metro, big box products fared much better in the first quarter of 2019. For buildings 200,000 to 499,999 square feet in size, vacancy was down six basis points to 9.82 percent. There are now 15 projects in this size range now under construction, where the average net effective rent is $4.95.
There were significant new leases in buildings between 500,000 and 749,999 square feet, leading to a two-percentage-points decline in overall vacancy rate during the first quarter, down to 7.12 percent. This size range absorbed 2.1 million square feet and there is currently more than double that under construction.
Vacancy in buildings greater than 750,000 square feet was at 7.16 percent, a 42-basis-point drop from the previous quarter. There are now six projects of this size under construction; when complete, they will add 4.8 million square feet to the metro’s supply.
The largest leases this past quarter were Fresenius Kabi USA’s 590,525-square-foot build-to-suit lease in Pleasant Prairie, Wisconsin, followed by Lennox International’s taking of 384,768 square feet in Romeoville and the 361,176-square-foot lease to Bed Bath & Beyond in Bolingbrook.
In terms of acquisitions, a number of massive portfolio transactions impacted the Chicago market. The largest property purchase, the 649,717-square-foot 2580 Prospect Court in Aurora, was acquired by The Blackstone Group as part of a 54-property national investment portfolio sale. Likewise, Colony Capital, Inc. recently purchased a 58-property, value-add national portfolio that included properties in University Park, Carol Stream and Batavia.
There were seven big box developments totaling 2.7 million square feet completed during the first quarter of 2019, with another 28 (totaling 13.5 million square feet) now under construction; 21 of those (totaling 9.7 million square feet) are spec projects.