chi-OpusJolietSpecIndustrial_Rendering (2) Although leasing slowed in 1Q, new construction has proceeded, including spec projects, such as this 36′ clear building in Joliet, IL, by The Opus Group.

CHICAGO—Leasing activity for the Chicago industrial market totaled a little more than 3.5 million square feet in the first quarter of 2017, 37.9% less than the total in the first quarter of 2016, according to a new market update from Cushman & Wakefield. Most observers, however, believe the slowdown is just a pause in transaction activity, and the market still has a healthy number of tenants actively looking for space.

“There are several million square feet of active tenant searches in the market, demand is steady and we expect leasing volume to rebound the remainder of the year,” Jason West, executive managing director of brokerage services at Cushman & Wakefield Chicago, tells GlobeSt.com. As to what caused the slowdown, that is “hard to pinpoint, but given the high leasing volume in 2016 we believe the first quarter activity was just a temporary hangover from last year.”

“Market fundamentals are still good, capital is flowing into industrial real estate and there is continued demand for both distribution and manufacturing facilities,” he adds. Leasing activity was strongest in the I-80 Corridor submarket for the third consecutive quarter, the data show, with nearly 800,000 square feet. Inventory Liquidators Corp. and CTDI signed two of the largest leases, for about 531,000 square feet at 8999 Palmer Dr. in River Grove, and 501,000 square feet at 3900 Brandon Rd. in Joliet, respectively.

It’s possible that the presidential transition, and concerns about how it may impact US trade relations, prompted many investors and tenants to adopt a wait-and-see approach. Investment sales totaled about three million square feet, a 42.3% drop from the first quarter in 2016, C&W finds. However, last year’s first quarter was one of the most active in years, and West says this year’s slowdown was anticipated.

And the initial construction numbers for the year indicate that the Chicago industrial market is still far from cooling off. Completions totaled around 3.1 million square feet, and the in-progress pipeline contains nearly 16.7 million square feet. Build-to-suit construction accounts for 53.5% or about 8.9 million square feet of the total. More than 7.7 million square feet of speculative construction will hit the market over the next 9-12 months.

Overall, C&W believes the “Chicago market will maintain low vacancies and see continued demand for new product from tenants of all sizes. Submarkets such as the ever-active I- 80 and I-55 Corridors will stay attractive to tenants with large square footage requirements helping to decrease vacancy and tighten up rents in the next few quarters. At the same time, infill sites in and near the City of Chicago will be high on the radar of companies seeking to be closer to business and residential end users.”