CHICAGO-Industrial property absorption in the Chicago area has hit some surprising numbers in a fundamentally slow economy, according to a Grubb & Ellis third quarter market report. The local market recorded nearly 2.5 million square feet of positive absorption in the quarter, bringing the year’s total to more than 6.6 million square feet, an amount not seen since the third quarter of 2007.
It’s still a big box distribution world in Chicago, a major rail and intermodal hub, and the numbers in the third quarter back that up. The Central Will County submarket led absorption with more than 860,000 square feet, including the 495,000-square-foot Electrolux lease in Minooka and the 415,800-square-foot Saddle Creek Corp. lease in Elwood. The vacancy rate dropped in the third quarter to 11%.
Investment sales have also improved in the past few quarters, according to the report. TA Associates Realty acquired a four-property portfolio in the North DuPage County submarket for $57.2 million, while Duke Realty Corp. purchased a nine-property industrial portfolio from TA, with eight of the properties in the Chicago area, for about $100 million.
Bob Bach, SVP and chief economist with Grubb & Ellis, tells GlobeSt.com that industrial is holding its own partly because of a resurgence of manufacturing activity, though this movement hasn’t translated into a demand for new space. “The Midwest economy is doing pretty well with a growth in the manufacturing sector,” Bach says.
Jennifer Morck, a senior research analyst for the company, tells GlobeSt.com that industrial growth is a good sign of an economic turnaround, because of how quick movement can happen in the sector. “While we’re looking at mostly build-to-suits right now, there are a few companies in the Chicago market looking for space,” he says. “Speculative development is still hopeful.” Only about 1.7 million square feet is in development in the region.
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