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- Gramercy Property Trust just bought this new building at 8901 W. 47th St. in McCook, IL, for $39.5 million, the largest purchase in the third quarter.
CHICAGO—The latest numbers on the Chicago region's industrial market have come out, and it's hard to discern any bad news. The market is on an incredibly healthy run, as users keep up a steady demand for space that developers are attempting to fulfill with a series of groundbreakings.
And a strong regional job market means this expansion is likely to continue through 2017. According to Avison Young's third quarter industrial market report, the metro area added more than 62,200 jobs this year as of August 2016, up 1.3% year-over-year, and the unemployment rate remained relatively unchanged at 5.4%. The sectors that recorded the highest year-over-year growth in employment were construction; leisure and hospitality. However, the manufacturing sector continued to see minimal growth.
“The main driver of the industrial market is e-commerce,” Greg Rogalla, research analyst, tells GlobeSt.com. That activity helped the market record a sizable boost in leasing activity and net absorption. Vacancy trended downward for the eighth consecutive quarter, and surpassed its prerecession level.
The overall vacancy rate fell to just 6.1%, a decline of 40 bps since the start of the year. Demand was strong in most submarkets in the third quarter, but the South Cook, I-80 East Corridor, and I-55 Corridor submarkets—down 120 bps to 5.0%, 100 bps to 6.1% and 100 bps to 6.1%, respectively, were the strongest. And net absorption throughout the metro area totaled 6.8 million square feet, a year-over-year increase of 3.4%.
The I-55 Corridor remained a user favorite, and the I-80 East Corridor witnessed an uptick in leasing activity. Users there absorbed 1.4 million square feet during the third quarter, and net absorption in the South Chicago submarket jumped 484% year-over-year to 498,000 square feet.
Rogalla attributes much of growth in both the city and the I-80 submarket to e-commerce. Around I-80, for example, both Amazon and IKEA have become big factors by taking down large blocks of space. Amazon's new building at 6521 W. Monee Manhattan Rd. in Monee will have 856,605 square feet, making it the second largest deal in the quarter, bested only by Georgia Pacific's agreement for one million square feet at 23534 S. Central Ave., also in Monee. And with I-55 now considered an infill market, he expects it's the I-80 area that will be the focus for many developers.
“Historically, I-80 has had lower land costs, and right now, it is one of the last submarkets with plots of land large enough to hold buildings of more than 500,000 square feet.”
The industrial sector has become the hottest segment in commercial real estate. How will logistics companies keep up with the market forces of omnichannel commerce? When will new supply finally catch up with demand? Who's putting investment capital into industrial and what does the future hold? Join us at RealShare Industrial on November 16 and 17 for answers to these and other questions. Learn more.
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Brian J. Rogal
Brian J. Rogal is a Chicago-based freelance writer with years of experience as an investigative reporter and editor, most notably at The Chicago Reporter, where he concentrated on housing issues. He also has written extensively on alternative energy and the payments card industry for national trade publications.
