CHICAGO—Most experts expected the Chicago region's industrial market to have a good year, and the final numbers are beginning to roll in. New data just published by NAI Hiffman show that in some ways, 2014 was historic. “The industrial vacancy rate improved by 44 bps in 2014, ending the year at 7.95%, the first time vacancy has dipped below the 8% threshold since 2001, 13 years ago," the company found.
Furthermore, due to the escalating demand developers have dusted off plans put on hold during the recession and begun putting new projects in the ground. "During the fourth quarter, nearly 3.5-million-square-feet of new construction projects were completed,” NAI Hiffman says, “bringing the tally for deliveries in 2014 to just shy of 10-million-square-feet.”
“Capital was sidelined for several years during the recession,” Geoffrey M. Kasselman, executive managing director of NGKF's national industrial practice, tells GlobeSt.com. But in 2014, capital providers finally got more aggressive, and brought “speculative or inventory building activity back with a vengeance.”
However, this does not fully explain the elevated level of new construction, the Chicago-based Kasselman adds. Many users now want a “hyper-efficiency in operations which cannot be readily achieved in generic spec buildings.” Furthermore, “many retailers now want to put specialized or unique facilities in locations closer to population centers which are not necessarily where spec buildings are being built.” For these and other reasons, about 50% of all new construction activity in Chicagoland has been user-driven build-to-suits.
"Over the course of 2014, Chicago's industrial market absorbed an impressive 11.7-million-square-feet of vacant space,” NAI Hiffman also found. “Net absorption totaled nearly 2.9-million-square-feet during the fourth quarter alone, outpacing the 2.2-million-square-feet absorbed during the third quarter."
And some of the region's submarkets have really begun to soar, Kasselman says. “Lake County activity, including Southern Wisconsin, is higher than I can ever remember in my 27 years in the business.”
More than 15.5-million-square-feet remains under construction, with more than 1 million-square-feet underway in the Southeast Wisconsin, I-80/Joliet Corridor, I-90 Northwest, I-55 Corridor, and O'Hare submarkets," according to NAI Hiffman.
This leads Kasselman to believe that “our region is close to fulfilling its potential and could experience record activity in 2015 and 2016.”
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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.
