CHICAGO—As the industrial market in the Chicago area begins to pick up speed, some tenants have decided to renegotiate leases or secure extensions before vacancy rates fall too far and rents start rising. Exel, for example, an Ohio-based third-party logistics provider, just signed a lease extension for their space in the Laraway Distribution Center at 1151 East Laraway Road in Joliet. They had earlier signed a five-year lease, set to expire in 2015, but opted to lock in a three-year extension to 2018 for 420,500-square-feet in the 736,780-square-foot building. The landlord, ING Clarion, also agreed to pay for some minimal improvements to the building, first completed in 2008.
“The best way to get the landlord to pay for this is to give them some security,” says Jeanne Rogers of Arthur J. Rogers & Co., a partner in The CORE Network, who represented Exel. “Now the landlord has a lease that runs for another five years.” The firms did not disclose the full terms of the deal, but Rogers adds that “we just wanted to make sure we got a lower rate.”
According to Colliers' report on the first quarter, “the Chicago industrial market experienced tremendous improvement in its vacancy rate in the first quarter of 2013 due to heightened tenant activity. The first quarter overall vacancy rate dropped 51 basis points from the fourth quarter rate of 9.51 percent to 9.0 percent. The dramatic improvement was the result of strong leasing demand coupled with a nominal amount of space returning to the market.”
The Joliet submarket did have a 12.04 percent first quarter vacancy rate, Colliers found, but that “is a 154-basis-point improvement from the vacancy rate of 13.58 percent reported one year ago.” Furthermore, “the I-80/Joliet Corridor started the year with 770,000-square-feet of lease transaction volume, nearly five times as much as the fourth quarter of 2012.”
The increased demand has finally caused developers to restart building in the submarket and may give tenants more options over the next year. In the first quarter, for example, a 1.1-million-square-foot speculative warehouse and distribution facility at 3851 Youngs Road in Clarius Park, Joliet, was completed.
The new construction in the submarket “will probably help keep the leasing rates low,” Rogers says, “unless big users come in and sweep it all up.” Still, even though other options could eventually open up, Exel preferred to stay put. The firm also rents out an additional 182,000-square-foot space under a separate lease in the same building, Rogers says. They use that space to provide services to another client, but keeping the separate operations under one roof helps their bottom line.
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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.
