CHICAGO—Like many of its counterparts across the US, the Chicago region's market for big box facilities really hit its stride in the first quarter, and the robust demand could set the stage for large scale construction later this year and into 2016.
According to a new report by Colliers International, the vacancy rate among the big box facilities fell from 10.29% at the end of the year to just 9.97%, a decline of 32 bps. And the market recorded about 1.8 million square feet of net absorption in both of the last two quarters. Colliers defines big box facilities as those with at least 300,000 square feet of space, of precast construction and with at least 28' clear heights. The majority of this space is in the I-80 and I-55 submarkets.
Large blocks of space are in short supply, Colliers' research shows. In fact, Clarius Park Joliet Building #1, a 1,000,000 square-foot property at 3851 Youngs Rd. in Joliet, is the only space greater than 750,000 square feet available in the metro area.
“I think that during the next round of development we will see the construction of more big box facilities,” Jack Rosenberg, the Chicago-based national director for logistics and transportation for Colliers, tells GlobeSt.com. Since the end of the recession, developers have been admirably restrained as they took their first steps to restart construction, he adds, but the capital markets have become much more open to financing industrial projects, and many submarkets, such as I-55 in the Chicago region, have experienced huge rent growth. “And that's not just in Chicago, it's nationwide.”
“The amount of preleasing that is going on is phenomenal,” he adds. Liberty Industrial Trust, for example, completed in the first quarter a 429,800 square-foot speculative facility at 300 Mitchell Rd. in North Aurora while Prologis finished a 329,800 square-foot property at 969 Veterans Parkway in Bolingbrook. And the owners of both facilities have already secured leases. UTI leased 201,300 square feet in Liberty's development while Suburban Chicago Accessory Center took 74,000 square feet in the Prologis project.
“But developers are now ready to start buildings with 600,000 square feet or more,” Rosenberg says. “My prediction is that by the third or fourth quarter we'll see these projects launch, and by the third or fourth quarter next year they'll start hitting the market. I think there is a huge appeal among users for this kind of space.”
If there is one thing that has surprised Rosenberg about the market recently, it's been the level of demand from companies with sales under $500 million. For years after the recession this group, or what he calls “Ma and Pa” outfits, did everything they could to avoid spending big money on new facilities. “But by the second quarter of last year the Ma and Pa users came back to the market in a big way. We have more total demand now than we did in 2006. For industrial space, we are at the peak of the market.”
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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.
