CHICAGO—As reported yesterday in GlobeSt.com, the Opus Group and USAA Real Estate Co. just succeeded in signing Midwest Warehouse & Distribution System, Inc. to occupy their new 604,565-square-foot logistics building in suburban North Aurora. And Mike Yungerman, vice president of real estate development for the Minneapolis-based Opus Development Co., LLC, tells GlobeSt.com it's a good sign for the I-88 area that such a huge speculative project, which the partners finished in October, was filled up so quickly.
“Given the historical trends, developers and owners are happy if they can get a building like this leased in six months,” he says. Back in 2013, Opus had started some smaller specs, but also noticed that “there was zero availability for I-88 tenants that needed new spaces with more than 400,000-square-feet. Eventually, there was going to be a need.”
Opus is just one of many developers that have taken advantage of the tremendous demand now coming from Chicago-area industrial users. In 2014, builders delivered projects with a total of 11.5-million-square-feet, a significant boost over the 8.8-million-square-feet they completed in 2013, according to a year-end report from Colliers International. Still, “although new construction is on the rise it is still considerably below the height of the market which reached 21.0-million-square-feet in 2009.”
“Speculative development will remain strong in 2015,” Colliers adds. “Developers will remain focused on building multi-tenant product in sizes from 100,000-square-feet to 500,000-square-feet.”
Opus plans to start a 425,000-square-foot project in northwest suburban Streamwood in the spring, Yungerman says. And over the next 60 days or so, company officials will also consider whether or not to launch Phase 2 of the North Aurora project, a roughly 400,000-square-foot building next to Midwest Warehouse's new home.
There are several significant obstacles to breaking ground on new industrial developments, especially ones that call for 600,000-square-feet to 1-million-square-feet, he adds. “The Chicago market has really turned into an infill market,” and it's challenging for developers to find enough reasonably affordable land to begin building. “You're trying to assemble multiple pieces of property.”
It's possible that builders will respond by simply pushing west into the Rockford and I-39 area. “That would be a good plan for tenants who use a regional distribution model,” Yungerman says, since they could reach both Chicago and many other points in the Midwest.
But he is skeptical that most users will want to go out that far. “What is more likely to happen is that rents in the Chicago area will go up because it will cost more just to acquire appropriate sites.”
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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.
