Chicago industrial real estate vacancy rate drops to record low

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The country’s hottest industrial real estate market heated up in the first quarter of 2022, fueled in part by stunning data from one of its submarkets.

Chicago’s industrial vacancy rate in the first quarter fell to 4.9%, the lowest vacancy rate ever in the market, according to a report released Tuesday by real estate consultancy Colliers International Group Inc. (NASDAQ: CIGI ). Chicago’s vacancy rate fell 53 basis points from the fourth quarter and fell nearly 175 basis points from a year ago.

Net absorption – the amount of space occupied in a given period minus the amount of space vacated – was 11.7 million square feet, well above the net absorption figure of 7 .1 million square feet in the first quarter of 2021 and on track to match the 44.9 million square feet in total for all of 2021, Colliers said. Net absorption totaled nearly 50 million square feet over the past four quarters, the highest tally over a 12-month period in market history.

About 16.5 million square feet of new leases were signed last quarter, the second-largest quarterly total behind the fourth quarter of last year, Colliers said. Average asking rent was $5.17 per square foot, up 8 cents per square foot from the fourth quarter.

Of the 22 submarkets comprising the Greater Chicago Industrial Area, five hit record vacancy rates during the quarter, according to data from Colliers. But nowhere has the push been more powerful than in the I-55 corridor, a 45-mile stretch that connects the city to Joliet to the southwest. Approximately 4 million square feet were leased during the quarter, bringing the corridor vacancy rate to 1.73%. A year ago, the corridor’s vacancy rate was 11.4%.

Craig Hurvitz, vice president of market research for Collier in Chicago, said eight projects totaling 2.4 million square feet were under construction along the I-55 corridor as of the end of March. Six of them were speculative developments, meaning they are being built without confirmed tenants. “There are many more projects planned in the pipeline,” he said in an email.

Data released last week by real estate consultancy CBRE Group Inc. (NYSE: CBRE) showed even less room at the Chicago Industrial Inn. The vacancy rate at the end of the first quarter was 2.3%, while the availability rate, which combines vacant spaces and spaces occupied but currently available for rent, was 3.9 %. Chicago was the leader in net uptake with 10.6 million square feet, CBRE said.

Colliers and CBRE may use different methodologies, which could explain the discrepancy in the data, according to Mark Thoman, a spokesperson for CBRE.

The only apparent constraint to Chicago’s continued industrial growth is access to available land. Chicago ranked ninth at the end of the quarter for the amount of square feet under construction with 20.5 million square feet, according to CBRE data. The Dallas/Fort Worth market was by far the leader with 57.4 million square feet under construction at the end of the quarter. California’s Inland Empire east of Los Angeles was second with just over 34 million square feet under construction

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