CHICAGO—By the end of 2014, the vacancy rate in the O'Hare submarket had sunk to just 5.98%, a drop of 240 bps in just one year, according to a report from Colliers International. The market has gotten so tight that credit tenants are filling up once-vacant properties east of the airport, an area with a lot of older, less functional buildings.
But with the help of municipalities like Franklin Park, some local owners have begun to reposition these structures. Elmhurst, IL-based Darwin Realty & Development Corp., for example, just completed 393,000 square feet of transactions for its client TA Associates and brought 3501 Mt. Prospect Rd. in Franklin Park, which had been vacant for several years, to 100% occupancy.
The owner “put a major capital investment into the property,” including new HVAC systems, a new roof and many other renovations, Darwin principal Richard G. Daly tells GlobeSt.com. It ensured that when clients came to tour the building “it competed on an equal level with the buildings west of O'Hare.”
The building sits on 14.5 acres near the future Irving Park Rd. overpass and features 11,285 square feet of office space, a 24' clear ceiling height and 41 exterior docks. The Darwin team and TA Associates worked closely with the Village of Franklin Park to obtain a Cook County real estate tax incentive.
“We filled the space with long-term credit tenants,” Daly says. Coregistics, which is expanding from a site in suburban Wheeling, leased 261,804 square feet. In the second transaction Sonoco, which is also expanding, leased 100,706 square feet and uses this site as an auxiliary to its other Franklin Park location. Robin Stolberg and Chris Tomasulo of JLL represented Coregistics while Mike Fonda and Annie Koch from Avison Young represented Sonoco.
There are many other signs of health in the submarket. Net rents for new leases are significantly higher than they would have been nine to twelve months ago, says Daly. And the amount of available space has shrunk so much that many credit tenants are leasing class B and C spaces if they need to expand immediately.
“The last time that the O'Hare market's vacancy rate fell below 6% was in the first quarter of 2001, when a rate of 5.32% was reported,” according to Colliers. And the 240 bps decline in vacancy since last year “represents the largest year-over-year decline of any Chicago-area market in 2014.”
In response to this intense demand, Brennan Investment Group, LLC recently finished a 139,400-square-foot speculative distribution facility at 1780 Birchwood Ave. in Des Plaines. And according to Colliers, Liberty Property Trust recently broke ground on a 235,800-square-foot speculative distribution building at 333 Howard Ave. in Des Plaines.
Daly expects that another wave of speculative building will soon arrive because once “class A product hits the market it is being absorbed at a rapid pace.”
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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.
