CHICAGO—Developers have either proposed or have under construction nearly 5-million-square-feet of speculative industrial space in the Chicago metropolitan area, and nearly 2-million-square-feet of that space is in Southeast Wisconsin, which has become the region's hottest industrial market.
“There's kind of a land rush going on in the area,” Steve Trapp, senior vice president of Jones Lang LaSalle Americas, Inc., tells GlobeSt.com. Many of those targeting the area are companies that want to distribute products throughout the Chicago and Milwaukee regions, and were attracted by Amazon.com's decision to put a distribution center with more than 1-million-square-feet in Kenosha. KTR Capital Partners is developing the facility and construction began in November.
That company's goal of using the most modern and advanced distribution centers to push same-day delivery could threaten those who are not ready to feed Amazon's pipeline. “They want their products to be up there and be available to Amazon,” Trapp says.
Vacancy rates have sunk to 5.8% in Kenosha County and 5.5% in Racine County, while Lake County, just over the border in Illinois, still has a 9.0% rate, Trapp adds. And the low rates north of the border have been a factor in reviving talk of speculative construction.
In August, GlobeSt.com reported that Chicago-based Paine/Wetzel/TCN Worldwide had completed a 314,249-square-foot lease for Integrated Merchandising Systems in a 626,784-square-foot industrial facility located at 10100 58th Pl. in Kenosha. The original owner built it on spec just before the economic crash and was unable to find tenants. The vast structure was originally left vacant, but IMS now entirely occupies it.
And the end of the recession has also restarted a corporate migration into Southeast Wisconsin. Beginning in 2004, 19 companies have moved from Illinois, Milwaukee and other states and into Kenosha County, mostly to the suburban hub of Pleasant Prairie, and now occupy about 7.2-million-square feet, according to data from JLL.
In 2006, for example, Uline moved from nearby Waukegan, IL, to 1.6-million-square-feet in Pleasant Prairie, and in 2013, Ta Chen International moved from Gurnee, IL into 471,000-square-feet, also in Pleasant Prairie. The entire industrial market in this corner of the state totals nearly 50-million-square-feet.
“There are several competitive advantages to being up there,” says Trapp. Land is much cheaper than in Lake County, railroad access better, and power can cost about 30% less, attracting companies working in industries that typically need a disproportionate amount, such as food distributors. In 2013, for example, Good Foods Group moved from Chicago and now occupies about 56,000-square-feet in Pleasant Prairie. And in 2012, Meijer Inc. bought a roughly 500,000-square-foot SuperValu facility and plans to expand it to 824,000-square-feet.
And in addition to the in-migration, “ten companies are making investments in new facilities in Racine and Kenosha Counties creating 2,800 new jobs,” according to a recent report by JLL. “With unemployment currently at 7.7% in Racine County and 7.4% in Kenosha, employers are forced to pull from a dwindling local labor pool.”
The market has gotten tight enough that manufacturers like Kenall Manufacturing, which is building a 354,000-square-foot facility in Kenosha, and TaChen have found it increasingly difficult to recruit, Trapp adds. And area distributors such as Amazon, United Natural Foods Inc., and Meijer “are on the lookout for supply chain talent.”
The California-based developer Majestic Realty Co. is getting ready to begin perhaps the biggest gamble on the region. Last year, it received approval from Pleasant Prairie authorities to build a 1.2-million-square-foot speculative distribution facility on an 88-acre site. And CenterPoint Properties has proposed a 520,000-square-foot spec facility, also in Pleasant Prairie, and HSA Commercial has proposed a 150,000-square-foot spec in Racine.
“It's not all bad for Illinois,” adds Trapp. “Southeast Wisconsin competes for high-tech workers with the Rockford and Loves Park area just south of the state line and those areas have great skilled labor.” The results have been heartening for Illinois boosters. Woodward Inc., for example, a company founded in Rockford in 1870, broke ground in 2012 on a $200 million aerospace manufacturing plant in Loves Park. And GE Aviation has just signed a lease renewal for 151,921-square-feet in Loves Park, nearly doubling its space.
And spec construction has also started in Waukegan. Last summer, HSA Commercial broke ground on a 218,500-square-foot building at Delany Rd. and Blanchard Rd., the first speculative industrial project northern Lake County has seen in a long time.
“Some companies just won't move out of the state of Illinois,” Trapp says.
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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.
