Since the start of this cycle, the Chicago metro has welcomed 242 speculative industrial projects totaling 65 million square feet, contrasting with 211 build-to-suits totaling 52 million square feet. As the latest quarterly numbers show, there’s no slowdown yet in spec development.
According to third quarter data from Colliers International, the Chicago metro saw 8.8 million square feet of new product delivered during the third quarter of 2019. This was the greatest quarterly tally since the current development cycle began in 2013.
Of the 27 projects delivered during the quarter, 15 were built on a speculative basis totaling 4.3 million square feet. The remaining 12 were build-to-suit facilities that accounted for another 4.5 million square feet. Even as significant new speculative supply is added to the market each quarter, the vacancy rate for spec buildings constructed this cycle continues to decline.
Chicago’s spec industrial product now sits at a 29.8 percent vacancy rate—the lowest of the current cycle and well below the 47.5 percent vacancy rate of just two years ago. This figure has decreased each of the past 10 quarters, suggesting that demand for new speculative warehouse space is outpacing new supply and the market is not being overbuilt.
Since 2013, there have been 91 spec buildings between 100,000 and 199,999 square feet delivered to the Chicago market, more than any other size segment. Totaling 13.4 million square feet, these buildings are 72 percent occupied.
Spec deliveries between 200,000 and 299,999 square feet have performed the best, at 78 percent occupied. There have been 41 buildings totaling 10.2 million square feet delivered in this size range. Interestingly, nearly all size ranges have leased similarly well with occupancy rates ranging between 71 and 78 percent.
The only exception are buildings greater than 750,000 square feet. There have been 11 spec buildings erected during this cycle in this size range, but these are only 56 percent occupied. That is an improvement, however, as last quarter this figure was only 35 percent leased. The significant change was due to a large whole-building lease being signed in the I-80 Joliet Corridor.
Developers certainly aren’t shy to keep building these large facilities as the largest construction start of Q3 2019 was Panattoni’s Orchard Gateway, a 764,895-square-foot, speculative, Class A distribution warehouse. Located in Aurora, Illinois, it will be one of the largest industrial buildings constructed to date within the submarket.
The cross-docked facility will offer 1,635 feet of frontage along I-88, 36-foot clear ceiling height, 166 exterior docks, 185 trailer parking positions, four drive-in doors and 304 car parking spaces. Alston Construction and Harris Architects have been hired on the project.
The largest completion this quarter was CenterPoint Properties’ 826,755-square-foot spec building at 3901 Brandon Road in its Joliet Intermodal Center. The paint was hardly dry on the building when it was subsequently fully leased by supply chain and logistics provider, UNIS, indicating that there is still appetite for Class A spec warehouses in the Chicago market at all sizes.