The area's current vacancy rate is "behind the curve" at about 7.5%, according to Hugh F. Kelly, CRE, chief economist for the Landauer Realty Group. Meanwhile, J. Leonard Caldeira of Cushman & Wakefield has figures showing a 5.7% vacancy rate in the city, 6.3% in the suburbs. Either way, the vacancy rate is higher that the East and West coasts--they hover around 3% in both Seattle and Oakland, 3.7% in New Jersey--while prices have been driven to "exceptionally high" levels, Kelly said. Meanwhile, capital has ignored the nation's heartland. But that will change, Kelly predicts.

"We're going to see a rebound in the next three years, with the central part of the country capturing some of that investment capital," Kelly says.

The price appreciation already is underway in some portions of the market, such as Goose Island on the Chicago River about three miles northwest of the Loop. "The worst advice a broker can give is advice based on listing comparables," says J. Leonard Caldeira of Cushman & Wakefield. But while city prices have soared it represents a small percentage of the market, he adds.Instead, the DuPage/Will County area saw the most transactions involving 100,000 sf or more last year, with Will County seeing more than three million sf added through build-to-suit projects. When the capital Kelly foresees coming to the Midwest arrives, the Cook and Will County areas along Interstate 80 should reap further benefits, Caldeira said. And western Cook County continues to see "pent-up demand" despite more than 4.4 million sf added last year.Projects such as the Ford plant on Chicago's southeast side and the Joliet Arsenal also don't hurt, Caldeira says. "It'll cause major users to give the Chicago marketplace a look at what's going on in this town," he said.

Also predicting a good year is Michael Brennan, president and CEO of First Industrial Realty Trust, Inc. "Those of you involved with user sales or investor sales should have a pretty good year," he says. Brennan bases his optimism on his company's talks with its 3,500 tenants, who report good business prospects rather than recession, as well as Federal Reserve pressure on commercial lending that has helped keep the supply of industrial property in check.

Other predictions from Caldeira include:* Continued movement of companies from Indiana back to Illinois.* Increased interest in sale/leasebacks as clients hope to remain in strong labor markets.* Third-party logistics companies, many of them fulfilling orders for e-commerce companies, will have an even stronger presence in a market that will see "4PL" players: consultants who advise the 3PLs, who will increasingly seek shorter lease terms. "Brokers and 3PL providers need to be marketing themselves to the 4PLs because they'll control the deals of the future.

Instant Insights /

Chicago, Midwest to Get Its Share of Industrial Capital, REIA/SIOR Hears

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