CHICAGO—Much like its counterparts in Los Angeles and New York, the industrial sector in Chicago should keep outpacing the rest of the national economy and see declining vacancies, rising rents and more new construction over the next few quarters, according to a new study on the second quarter by Lee & Associates. The vacancy rate fell to just 8.6% as the market recorded 2,303,618-square-feet in net absorption. And in the second quarter, developers had a total of 7,721,186-square-feet under construction.

“Availability overall is at its lowest levels in years, which has pushed lease rates and sales prices higher,” the study says. “Average asking lease rates are $5.23-per-square-foot.”
Lee also expects that the steadily declining vacancy rate will “allow landlords to reduce concessions, insist on longer lease terms and negotiate for higher net rents.” However, they expect the decline will not yet have much of an impact on investment credit tenants, who will still have the leverage to negotiate for concessions.

And all of this activity should make it much easier for developers to raise money for new projects, including speculative ones, which should help fill the demand for class A space. The researchers note that developers currently have plans to start the building of more than one dozen speculative projects by 2015, mostly in the Southeast Wisconsin, O'Hare and Far Southwest submarkets.