CHICAGO—Chicago's industrial market has put together some solid quarters since the recovery began, but the second quarter of this year saw the most positive absorption in years, according to a study just released by NAI Hiffman. Net absorption totaled 5,688,263-square-feet between April and June, the highest tally since mid-2010. Furthermore, the overall vacancy rate improved by 18 bps during the quarter, decreasing to 8.09%, which NAI Hiffman terms “a rate that suggests a healthy, active market and encourages confidence in the market for landlords, investors, and developers.”
In addition to the healthy absorption, rental rates increased along with property sales and new development. In fact, developers have more than 11.4-million-square-feet under construction and delivered more than 4-million-square-feet of new product during the first half of the year.
“Chicago's real estate markets – both in the industrial and office sectors – have crested a ridge,” says John R. Picchiotti, chief operating officer, brokerage. “We've seen several consecutive quarters of positive absorption; after several years of struggle, we're coasting and picking up speed.”
Three submarkets accounted for 77% of the absorption that took place during the second quarter, NAI Hiffman found. The I-55 Corridor led the way by absorbing 2,646,822-square-feet, both through leasing activity and build-to-suit completions. The I-80/Joliet Corridor absorbed 973,462-square-feet and the Southeast Wisconsin submarket came in third by absorbing 754,766-square-feet.
The largest lease of the quarter was a build-to-suit lease for tire manufacturer Michelin in the RidgePort Logistics Center in Wilmington. And Ferrara Candy Company leased the 747,150-square-foot building located at 901 Carlow Dr. in Bolingbrook. It was recently vacated by Home Depot for its move to its new campus in the CenterPoint Intermodal Center in Joliet.
Investment and sales increased throughout the metro area during the second quarter. Several portfolio sales were completed, but WP Carey & Co., LLC completed the largest single building sale by purchasing for $47,208,000 the 824,624-square-foot building fully-leased to the J.M. Smucker Company located at 300 Central Ave. in University Park.
“Construction activity increased dramatically during the second quarter, with 24 new projects breaking ground between April and June,” the report noted. Developers have 43 projects underway, and speculative development has also picked up, and now accounts for nearly half of the ongoing construction.
The I-55 Corridor also leads in speculative construction. Developers in the submarket have a total of more than 3-million-square-feet of new projects underway, 87% of which is on a speculative basis. The Southeast Wisconsin submarket follows closely behind. Developers there have 2.8-million-square-feet underway, and delivered a total of 3,572,185-square-feet during the second quarter.
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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.
