Small- and mid-sized deals drove the market in the second quarter, the firm says. One example is a 32,880-sf deal for Consolidated Electrical Distributors Cushman & Wakefield brokers in July in the southwest suburban countryside.
Another exception to the otherwise stagnant market is north suburban Lake County, where Cushman & Wakefield finds an increased amount of deals involving users. "Sale prices in Lake County are exceeding replacement costs," says Keith Puritz, a director in the firm's industrial services group.
Puritz was involved in a deal in July in north suburban Lake Forest, where wholesale liquor distributor Lionstone International leased 41,050 sf from Duke Realty Corp.
"In addition, infill-site sales in and surrounding the east O'Hare market are also in demand due mainly to the fact that while this area is desirable, the buildings that exist there are older and land for development is scarce," Puritz adds. "Consequently, developers are looking at the land where these third generation properties are located, tearing the buildings down and developing speculative buildings."
One of the larger deals involved Design Pac, which leased 252,000 sf in Elk Grove Village from CenterPoint Properties Trust. Another was Nippon Express USA's taking 125,000 sf in Bensenville, another suburb in O'Hare's shadow. Cushman & Wakefield brokers were involved in both lease deals, as well as two separate building sales in the two suburbs at an average of $40 per sf. And on the horizon, CenterPoint plans to develop another 800,000 sf of air freight space on the north side of the airport after the success of its O'Hare Express Center on the south side.
Overall, asking rental rates for industrial property in the market was $4.79 per sf in the second quarter, up less than 2% from a year ago. Meanwhile, the overall vacancy rate jumped a full point to 7.9%, according to Cushman & Wakefield. Breaking the market down further, the firm reports an 11.4% vacancy rate for warehouse and distribution space, up from 9.9% at the beginning of the year. And asking rental rates for that product has dropped nearly 3% from the beginning of the year to $4.42 per sf.
Not only is sublease space affecting rental rates, but also new construction. Puritz says. "A lot of quality, second generation space is currently available, causing companies to reconsider build-to-suit plans," he notes.
Notable exceptions recently include developments in Northlake, Waukegan and Hanover Park, as well as Bridge Development's plans for a 200,000-sf project in Woodridge.
Puritz is optimistic, considering Chicago's importance as a transportation hub. "The current activity in the market should translate into actual deals during fourth quarter 2001," he says.
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