The impact of tariffs on Chicago’s industrial sector? Transwestern predicts that it will be minimal.
In a new report released this week, Transwestern says that Chicago’s industrial market is likely to perform as well as, if not better than, most other major cities even if higher tariffs go into effect on imported goods.
Why? It comes down to how the demand for industrial space works. As Transwestern says in its report, the demand for industrial space in a given market rises or falls mostly because of local factors.
That includes both population and income growth. It also includes the desire of local residents to want the products they order online or from physical stores to show up quickly at their doorsteps. Chicago benefits from this thanks to its location in the center of the country, making it a strong distribution hub, something that will continue despite tariffs.
Transwestern points, too, to Chicago’s robust manufacturing sector. In fact, Chicago boasts more manufacturing space than any U.S. city.
One challenge? Transwestern says markets that are considered more business-friendly are the ones expected to benefit the most from any increase in onshoring brought about by tariffs.
Chicago isn’t always known as being an overly business-friendly environment. Because of this, Transwestern says, any new manufacturing ventures within the Chicago MSA are likely to be drawn to the slices of Wisconsin and Indiana that are considered part of the greater Chicago region. Wisconsin and Indiana are considered more business-friendly by many corporations.
Despite that challenge, and even with the fact that the Chicago area’s population growth has been lackluster in recent years, Transwestern predicts that the city’s central location and dominance as a transportation and logistics hub should allow the market to adapt and thrive even if tariffs cause supply chain routes to change.
Don’t expect tariffs to increase the Chicago industrial market’s vacancy rate, either. Transwestern said that the Chicago-area industrial vacancy rate stood at 5.2% as of the end of the first quarter. At the same time, new industrial construction here has slowed to just 1.4% of total inventory.
The higher construction costs expected to result from tariffs are expected to further slow new construction in this sector. As the pipeline of new industrial projects dries up, expect vacancy rates in the Chicago market to remain low.
