Industrial Market Hits Pause, But Retains Underlying Strength

Crossroads 55, a new spec in Channahon, IL, has both more than one million SF and 40′ clear ceilings.

CHICAGO—After several years of declining vacancy, rising rental rates, and record-breaking construction levels, the Chicago region’s industrial sector might be ready for a temporary pause. The latest statistics released by Newmark Knight Frank show a market that has slowed, but one with enough underlying strength to possibly jumpstart leasing activity later in 2018.

Vacancy increased for the second quarter in a row and now stands at 8.5%, a rise of 40 bps. NKF also recorded 615,000 square feet of positive absorption in the fourth quarter, which was the first time since 2011 that quarterly absorption failed to hit one million square feet. But NKF experts say a modest slowdown at this point in the cycle may not be unnatural.

“I don’t think this is that worrisome,” Amy Binstein, Chicago-based research manager, tells GlobeSt.com. “We have hit a plateau, but industrial real estate is still the strongest performing asset class,” and a boost in vacancy is what happens in a market where developers delivered more than 13 million square feet in the second half of the year.