It's no surprise, therefore, that Chicago is one of the most favored regions for investors. Colliers studied in detail the results for Greater Los Angeles, Dallas, Chicago, Atlanta, Toronto and New Jersey, the top distribution markets in North America, and only properties in Los Angeles sold at lower cap rates than in Chicago. Cap rates for big-box buildings in the latter have remained under 6% since 2014, finishing 2016 at 5%, while in LA buildings are now at just 4.3%.

The need for modern distribution facilities boosted product under construction in Chicago to 17 million square feet, “the most for a core big-box market at year-end,” says Colliers. “Despite the new development, strong leasing is likely to keep vacancies stable for the foreseeable future.”

CHICAGO—As reported in GlobeSt.com, the demand for class A distribution buildings that provide more than 300,000 square feet of space has soared in many US markets, and experts believe developers will continue to build at a robust pace at least through the end of 2017. This is especially true in the Chicago region, which, even more than other core markets, has seen e-commerce drive demand for new product.

The importance of e-commerce in Chicago is illustrated by the central role of Amazon. In 2016, the internet giant signed 30% of the new big-box leases in Chicago, according to the new report on the sector by Colliers International. And the firm's activity increased as the year progressed. Amazon leased a total of two million square feet across three properties during the fourth quarter, including a 747,000 square foot spec project at Laraway Crossings Business Park in Joliet.

There are 300 big-box buildings in Chicago, totaling 167 million square feet, according to Colliers. Nearly 41 million people live within a 250-mile radius of Chicago's industrial core, and that has brought occupiers into the market in droves. The region saw nearly 13 million square feet of occupancy gains within the big-box sector in the past year alone.

That was enough to more or less keep pace with the record amount of space completed by developers, the majority of it done on a speculative basis. Builders finished 14 million square feet in 2016, 57% of which was speculative, with the majority of the space in the I-80 Joliet Corridor, the favorite region for users with regional or national distribution operations. And even with all this new construction, effective rental rates rose each quarter in 2016, finishing the year at $4.43, up from $3.80 last year.

It's no surprise, therefore, that Chicago is one of the most favored regions for investors. Colliers studied in detail the results for Greater Los Angeles, Dallas, Chicago, Atlanta, Toronto and New Jersey, the top distribution markets in North America, and only properties in Los Angeles sold at lower cap rates than in Chicago. Cap rates for big-box buildings in the latter have remained under 6% since 2014, finishing 2016 at 5%, while in LA buildings are now at just 4.3%.

The need for modern distribution facilities boosted product under construction in Chicago to 17 million square feet, “the most for a core big-box market at year-end,” says Colliers. “Despite the new development, strong leasing is likely to keep vacancies stable for the foreseeable future.”