CHICAGO—In the second quarter, the amount of leasing activity among the Chicago region's largest industrial properties was quite spectacular, and at least in that sense, the past few months was a bit of a letdown. However, the vacancy rate for these big box facilities has continued to decline, and Jack Rosenberg, national director for logistics and transportation for Colliers International, tells GlobeSt.com that one quarter can't tell the market's whole story, and over the next year or so he expects to see it put up solid numbers.

"Part of the reason for the decline in leasing activity is a lack of available product," he says. "I have a customer who needs about 600,000 square feet in the I-55 area by June 1st, and there is not one building available." It's just one example of how the amount of leasing activity in a given quarter may not fully reflect just how much demand is out there waiting to be fulfilled. Developers will, however, have three specs ready by early 2017 that should fit this client's requirements quite well.

The market recorded about 3.2 million square feet of net absorption in the third quarter, significantly less than the roughly 4.9 million square feet in the second, according to Colliers' most recent data. And at 2.4 million square feet leased, the third quarter volume was less than half the figure reached in the second. Still, the vacancy rate among the big box facilities has continued to sink, falling from 9.31% in the second quarter to just 8.67%, a decline of 64 bps.

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 Chicago region's big box inventory consists of 271 facilities totaling 152 million square feet. The majority of this space is in the I-80 and I-55 submarkets.

The historic leasing activity in the second quarter was driven by Saddle Creek Logistics' decision in May to lease a new 1,114,575 square foot build-to-suit distribution facility at CenterPoint Intermodal Center in suburban Joliet. The transaction was the largest industrial transaction in the Midwest region up to that point, according to officials from Newmark Grubb Knight Frank, which represented Saddle Creek. The top deals in the third were the Central American Group's leasing of 490,420 square feet at 815 Bluff Rd. in Romeoville, and Swap.com taking 361,176 square feet at 850 S. Veterans Pkwy. in Bolingbrook.

"The water cooler talk at every industry event and every office is about where we are in the cycle," Rosenberg adds, "and I think the user demand cycle has more legs and strong demand will continue at least through next year." The expansion of e-commerce will drive much of this, not just in Chicago, but throughout the nation. "More and more manufacturers are being required to ship directly to individual households," for example, and this will require the construction of many new distribution facilities.

Furthermore, even in the short term he "expects the leasing numbers to be higher in the fourth quarter than they were in the third. Some of our clients have come to us recently and said they were expanding and need about 50% more space. So that's a good sign."