However, Ahern is among those who have noticed a bet by some developers that the economy will improve. "There's a lot of activity in the land acquisition business," Ahern says during an earnings conference call. "Developers and builders are positioning themselves for recovery."

Already the largest owner of industrial property in the market, CenterPoint Properties Trust also is among the most active buildings, with its redevelopment of the former Joliet Arsenal in Elwood, IL into the CenterPoint Intermodal Center among the largest. The 1,200-acre, $180-million intermodal facility in Rochelle, IL for the Union Pacific railroad also is on time and on budget, reports president and chief operating officer Michael M. Mullen. Ahern notes Rochelle, on the far western fringe of the market, also is seeing "a lot of land plays."

Also, all of the 1.6 million sf at the company's Ford Supplier Park on Chicago's Southeast Side has been claimed, he adds.

While Ahern notes industrial vacancy rates in the city have jumped from 7% to 10%, developers willing to build there can expect high rents and returns as a result of tenants seeking newer space.

Another product in short supply is larger buildings in the O'Hare submarket, Ahern notes. Some larger tenants are ending up at CenterPoint properties in the west suburbs of Franklin Park and Melrose Park.

While building continues in the area around I-80 and I-55, vacancy has dropped more than five percentage points to 11.5%, Ahern notes, as the submarket has become a hot area for tenants seeking large regional distribution centers.

CenterPoint Properties Trust sold $188 million in property in 2002, Mullen says, including $48 million in the fourth quarter. The four fourth-quarter sales were evenly split between owner/users and investors, he adds.

"Cap rates on triple-net leased industrial buildings are as low as I've ever seen in my 26 years in the business," Mullen says. "It's a very good time to be a seller."

Instant Insights /

Market Isn't Stopping Land Buying, REIT Observes

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