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Amazon Altering the US Industrial Landscape

CHICAGO—Amazon's announcement that it plans a new 850K warehouse in Monee, IL, is just the latest move in a series that has altered the thinking of brokers and occupiers in the big box distribution space.

By Brian J. Rogal | brianjrogal | | Updated on August 31, 2016
chi-Hillwood-and-Laraway (2) In addition to its just-announced plans for a Monee facility, Amazon recently decided to occupy this 746K spec building, developed by Hillwood, in Joliet.
CHICAGO— Amazon.com plans to open yet another fulfillment center in suburban Chicago, this time in Monee, IL. The retail giant plans to hire hundreds of new employees to pick, pack and ship small items to customers at the roughly 850,000 square foot facility, located at 6521 W. Monee Manhattan Rd. RELP Bailly, LLC , an affiliate of USAA Real Estate Co. , will develop the facility, set for completion in 2017. “We place our fulfillment centers close to customers to provide the fastest possible delivery times, and the growth in Illinois is directly tied to our increasing customer demand,” says Akash Chauhan , vice president of Amazon’s North America Operations. “Illinois is a great state to do business, and we are happy to be expanding there to serve customers.” Yesterday’s announcement does not come as a surprise, as many observers of the local industrial market predicted Amazon would start a major facility in Monee even after its recent agreement to fully occupy a new 746,772 square foot spec building at 201 Emerald Dr. in nearby Joliet, and to take 767,161 square feet at 1125 Remington Blvd. in Romeoville. And all these moves by Amazon, both in the Chicago region and around the nation, have altered the industrial landscape. “It’s absolutely a game changer for the marketplace, and it’s having huge ripple effects,” Geoffrey M. Kasselman , executive managing director, Newmark Grubb Knight Frank, tells GlobeSt.com. He leads the firm’s national industrial practice, and says Amazon is engaged in “the single greatest takedown of industrial space in  my lifetime; and I have been doing this for thirty years. It’s not just another warehouse in Monee.” “We’re all either working for Amazon or we’re competing with them whether we know it or not,” he adds. As brokers, when they escort clients around looking at big box distribution spaces, they have to assume Amazon is also looking at the same spaces, and not just in Chicago. In addition to the impact on pricing, many occupiers also say “‘I don’t want to be near Amazon because I don’t want to compete with them for labor.’” The vacancy rate in the Chicago region’s big box distribution sector was at 7.51% by the end of the second quarter, according to Colliers International , a decline of nearly 200 bps since last year. That vacancy rate has increased a bit in the past few months, company researchers found, but primarily because so much new construction has been hitting the market. And Amazon probably has additional plans on the drawing board. “They’re going to do another warehouse up in Lake County,” Kasselman says. He has no insider knowledge of any pending deal, but according to “market rumblings,” the north suburban Lake County project will be over 500,000 square feet. The Monee building is just “a stepping stone; they’re not done.”    

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