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Chicago Industrial Vacancy Rate Sinks Below 7%

CHICAGO—The metro area has not seen a rate this low in 15 years.

By Brian J. Rogal | brianjrogal | | Updated on August 04, 2016

 

chi-Hillwood-and-Laraway (2) Amazon has decided to occupy this 746K spec building, developed by Hillwood, in Joliet.
CHICAGO—The Chicago area industrial market continues to thrive, according to a new report on the second quarter by Colliers International . Developers finished another sixteen new buildings totaling 4.6 million square feet, and 61.4% of that work was done on a speculative basis. Perhaps most impressive, however, was the level of tenant demand. Users absorbed another 5.3 million square feet, bringing the year-to-date total up to 14.3 million square feet and sending the vacancy rate down to just 6.91%, the first time that figure sank below 7.0% in 15 years. “Demand for space continued to outpace the effects of new speculative construction completions, many of which have been delivered to the market at least partially vacant,” the report says. And the vacancy rate is now below 6.0% in nine of the region’s 22 submarkets, with the O’Hare submarket leading the way at just 4.21%. That’s an amazing turnaround from five years ago, when it was 13.17%. The greater need for distribution buildings has benefitted the land-scarce submarket, due to the proximity of the airport and the many highways that connect it to the rest of the metro area. “Despite 8.8 million square feet of new vacancies coming online during the second quarter due to speculative construction completions and vacated second-generation space, new leasing and user sale activity resulted in a reduction of the total vacant supply in the market to 93.0 million square feet, more than 3.1 million square feet less vacant space than was available one year ago,” Colliers notes. The importance of e-commerce to the entire market was shown again by the largest leases of the second quarter. Amazon.com not only leased the entire 761,767 square foot building at 1125 Remington Blvd. in Romeoville, recently vacated by Central American , it also took  Hillwood Development Co.’s 746,772 square foot speculative building at 201 Emerald Dr. in Joliet.

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