A slowdown in the Chicago industrial market? That’s what Transwestern pointed to in its fourth quarter Chicago Industrial Market report released late last month.
According to Transwestern, in the fourth quarter of 2024, the Chicago industrial market absorbed a total of 100,576 square feet of space. That brought the yearly total in the Chicago market to to 6.97 million square feet of industrial absorption.
Transwestern reported that the fourth-quarter absorption numbers consisted of 656,017 square feet of warehouse-distribution space and a negative 555,541 square feet of manufacturing space.
The fourth quarter absorption numbers represents the lowest total quarterly absorption of industrial space in the Chicago market since the first quarter of 2015 and the lowest quarterly warehouse-distribution space absorption since the first quarter of 2017.
The direct vacancy rate remained steady at 5%, with Transwestern reporting that manufacturing space ended 2024 with a direct vacancy rate of 3.8% and an overall vacancy rate of 4.1%. Warehouse-distribution space closed the year with a direct vacancy rate of 5.4% and an overall vacancy rate of 6%.
According to Transwestern’s report, the lowest vacancy rates in the Chicago industrial sector are in the McHenry County submarket, with 2.5% direct and 3% overall.
The highest vacancy rates are in the Kenosha, Wisconsin, submarket, with an 11.9% direct vacancy rate and 12.5% overall. This isn’t surprising, as the Kenosha market’s industrial inventory expanded by 36.8% during the past five years.
Don’t expect the vacancy rate in the Chicago industrial market to fall soon. Transwestern predicts that this rate will continue to rise in 2025 as more industrial inventory is added to the market. However, Transwestern does predict that the direct industrial vacancy rate in the Chicago market won’t rise past 6.2%, still a fairly low number.
The Fox Valley submarket had the highest industrial absorption in the fourth quarter, with 1.2 million square feet of positive absorption, according to Transwestern.
The Chicago industrial market saw 7.2 million square feet of leasing activity in the fourth quarter, significantly lower than the historic high of 23.6 million square feet in the first quarter of 2022.
In another sign of the slowdown in this sector, Transwestern reported that available sublease space nearly doubled in 2024, increasing from 8.5 million square feet at the end of 2023 to 16.4 million square feet by the close of 2024.
Only 1.3 million square feet of new inventory was added in the fourth quarter of 2024. Again, this is more evidence of the overall slowdown in this sector. According to Transwestern, this represented the lowest amount of industrial space added in a single quarter in the Chicago market since 2013.
In a bit of positive news, lower interest rates spurred a slight increase in construction activity, with 12 projects breaking ground. These projects totaled 3.5 million square feet.