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Brighter Forecast for Chicago Industrial

Along with modest signs that the local economy here is improving, the industrial market should see some stabilization in 2010.

By Alyson Grala | Updated on February 17, 2010

CHICAGO-The vacancy rate for industrial real estate in the Chicago area rose again in the fourth quarter of 2009 to 12.15%, the highest level in at least 19 years, as demand for space fell for the eighth consecutive quarter.

The vacancy rate for manufacturing facilities and warehouses rose from 11.91% in the third quarter and 10.32% in the fourth quarter of 2008, according to a report by Colliers Bennett & Kahnweiler Inc., which began tracking the local industrial market in 1990. The vacancy rate has been climbing since the third quarter of 2006, when it stood at 8.39%. “We are likely to continue to bump along in 2010,” says David Bercu, a principal with the Rosemont, IL-based real estate firm. “It’s like pushing rocks up hills.” Demand for space worsened during the fourth quarter, declining by nearly 3.8 million square feet, compared to a third-quarter drop of 3.1 million square feet.

Market activity also remains low. In 2009, activity fell 15%, to 38.6 million square feet, compared to 45.5 million square feet in 2008. Activity is down 35% from the peak in 2005, when 59.5 million square feet was leased or sold. “People are in clamp-down mode,” says John Pagliari, a senior vice-president in the local office of Sacramento, CA-based industrial developer Panattoni Development Co. Activity will pick up slightly in 2010, he forecasts, but rents and sale prices will be more than 30% less than their peaks in 2007.

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