CHICAGO—The metro region's industrial market experienced another solid quarter, with the Southeast Wisconsin submarket leading the way, according to a new analysis by NAI Hiffman. Furthermore, developers delivered more than 2.5 million square feet of new space in the first quarter and have another 12.9 million square feet under construction, up from 9.6 million square feet under construction one year ago. The market has not surpassed its 20-year historical average of 14.4 million square feet of total deliveries since 2008.
The Chicago region saw 3.2 million square feet of positive absorption in the first quarter and the vacancy rate dropped by 10 bps to 7.84%, says Kelly Brown, senior research manager for NAI Hiffman.
Developers have more than 3 million square feet of space under construction in Southeast Wisconsin alone, the most of any submarket. Several others including the I-80 Joliet Corridor, I-90 Northwest, the I-55 Corridor and O'Hare have more than 1 million square feet under way, Brown adds. “We are seeing an increase in land acquisitions as developers take positions for future projects in both infill locations as well as greenfield submarkets.”
The top leases in the region over the past few months were PAE taking 723,000 square feet at 1070 Windham Parkway in suburban Romeoville, and Midwest Warehouse occupying 604,000 square feet at 1200 Orchard in North Aurora.
“It seems that companies that survived the recession are now at their capacity and they are absolutely in expansion mode,” says senior vice president Chris Gary. Southeast Wisconsin saw the most new construction of any submarket. Three fully-leased buildings with about 1.2 million square feet were delivered: a 500,000 square-foot building for Amazon in Kenosha; a 370,000 square-foot building for Niagra Bottling at the LakeView Corporate Park in Pleasant Prairie; and 340,000 square feet for Kenall Manufacturing at the Business Park of Kenosha.
One of the most significant sales of the quarter involved the vacant 776,515 square-foot property at 21700 Mark Collins Dr. in Sauk Village. It was a small part of a 117 million square-foot portfolio sold by IndCor Properties, a division of the Blackstone Group, to Global Logistic Properties Ltd. and GIC Pte. Ltd. for $8.1 billion. This was “the largest investment sale of the year,” says Gary.
And “for the second consecutive year, in 2014 the city of Chicago gained the most corporate moves” of any US city, Gary adds. “Most of these companies are tech-oriented and they don't really affect the industrial market directly. But they absolutely affect it in the sense that young people are moving into the city in droves, and the support businesses are locating closer and closer to the downtown area.” And “for the first time in recent memory, infill has become a hot commodity in the city of Chicago.”
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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.
