Demand for industrial real estate, rental prices and deliveries continue to climb in the Chicago metro area

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While it’s still too early to know for sure how the downtown office market will react to the post-pandemic workplace, new numbers show that the Chicago-area industrial real estate market has continued to progress despite the widespread economic hardship caused by the COVID-19 pandemic. And those who have been following commercial real estate over the past year may not be surprised as the pandemic has led to increased demand for shipping, distribution and warehousing, driven largely by e-commerce. and rental of data centers.

According to a recent report by Colliers, industrial leasing in the Chicago market grew three straight quarters between Q3 2020 and Q1 2021. Net uptake in the first three months of this year was 7. 2 million square feet – the same number in the first quarter of 2020. The overall vacancy rate for the Chicago area was just 6.88% in the first quarter of this year, while vacancy figures in eight of the 22 tracked submarkets continue to trade near all-time lows.

And as expected, leasing was strong in the first quarter of this year with 13.8 million square feet of industrial space claimed over 150 new leases or expansions. This is a slight, but noticeable, increase from the 11.1 million square feet of leasing activity during the same period in 2020. The industry continued to perform in Metro Chicago even if the unemployment rate in Illinois soared in the spring and summer of last year.

But there’s still more on the way. The last quarter saw the delivery of 8.6 million square feet across 15 newly completed buildings while another 24.2 million square feet of industrial space remains under construction. Developers and investors continue to trust the market since 42% of deliveries in the last quarter were speculative projects. Meanwhile, bespoke construction continues to outpace spec development by quite a wide margin.

Additionally, average asking rents have risen steadily over the past few years, peaking at $4.88 per square foot in the first quarter of 2021. A chart shows that the average rent price bottomed out at $3.98 in 2010 , during the Great Recession, but this figure has increased. every year since. The average asking selling price for industrial property bottomed out in 2021 at $40.47 per square foot, but has also been rising steadily each year, hitting $47.21 in the first quarter of this year.

The report highlights a flurry of bespoke developments for various retailers, including new distribution facilities for Wayfair and Home Depot. Walmart, Lippert Components, AKIRA, Xpedient Logistics and B&G Foods are a handful of other companies to secure large bespoke leases in the first few months of the year.

In terms of submarkets, the I-80 corridor and the southern suburbs see the most construction and deliveries. Along the I-80 corridor, 2.774 million square feet of industrial space was delivered in the last quarter, while another 3.796 remain under construction. And in the southern suburbs, more than 806,000 square feet of space has been completed with 7.6 million square feet still in the pipeline.

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