For the past few years, Chicago has done well each quarter in providing a great industrial market. Much of this activity is coming from major submarkets in the area, especially those close to the I-55 Corridor, O'Hare, I-88, and I-80. Large organizations such as Mars and Saddle Creek are constantly looking to find space within the Chicago submarkets. These two companies signed leases back in 2015 at the CenterPoint Intermodal Center located in Joliet, Illinois, which is a suburb of Chicago. Since the market is performing so well, Chicago can expect more industrial growth in the future.
New development in the area
George Cutro, the director of industrial research at JLL, said that throughout the city and suburbs, there are 48 projects currently under development. JLL provides real estate strategy, services, and support to organizations across the globe. All of these projects combined, take up 13.8 million square feet of inventory. Of course this number is nowhere close to what it was before the recession hit, but it is continuing to grow. There has also been a shift in building size of new construction areas within the past 18 months, according to Neal Driscoll. Driscoll is the Vice President and City Manager at Liberty Property Trust. This is because developers see big box industrial trends to be more of a commodity than multi-tenant products. Still, Cutro works with users who want modern, sleek functional products.
2016 industry trends
With an ever changing market, industrial experts say that 2016 is the year of new trends, which you can expect to see in Chicago. One of these trends was in developing a 1 million square foot locations for growing demands. In 2015, there were two 1 million square foot plus built to account for all signed leases. With a growing market, usually only one of these is seen per year, but there were two in 2015. Another industry trend becoming more popular is e-commerce. In fact the company Amazon signed five leases within the Chicago market this year. One of these was at a 475,100 square foot space located in Joliet. These trends are definitely something the industrial market can expect to continue in 2016.
Industrial experts surprised
There were some things that happened in 2015 that did surprise experts in the industrial field. Cutro was surprised by the amount of money chasing industrial product. This is because there were two pre-sales of speculative developments for the year, which hasn't been witnessed since before the recession. Speculative and build-to-suit developments have both been growing and thriving, but speculative developments have surpassed build-to-suit completions. Comparing numbers, 8 million square feet of speculative developments were completed in 2015, versus 5.9 million built-to-suits. This is the first year since the recession that the Chicago market has seen substantial speculative development. It is something that came as a surprise, but a good surprise.
What this means for vacancy rates
Since Chicago is the second largest industrial market in the U.S., vacancy rates have been dropping over the past few years. Research from JLL shows that Chicago vacancy was at 6.8 percent in the third quarter, which was down 70 basis points from the previous quarter. This marks the 20th consecutive quarter with positive results. It seems like the industrial market in Chicago will remain a thriving field.