CHICAGO—Chicago's industrial market has put together some solidquarters since the recovery began, but the second quarter of thisyear saw the most positive absorption in years, according to astudy just released by NAI Hiffman. Net absorptiontotaled 5,688,263-square-feet between April and June, the highesttally since mid-2010. Furthermore, the overall vacancy rateimproved by 18 bps during the quarter, decreasing to 8.09%, whichNAI Hiffman terms “a rate that suggests a healthy, active marketand encourages confidence in the market for landlords, investors,and developers.”

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In addition to the healthy absorption, rental rates increasedalong with property sales and new development. In fact, developershave more than 11.4-million-square-feet under construction anddelivered more than 4-million-square-feet of new product during thefirst half of the year.

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“Chicago's real estate markets – both in the industrial andoffice sectors – have crested a ridge,” says John R.Picchiotti, chief operating officer, brokerage. “We'veseen several consecutive quarters of positive absorption; afterseveral years of struggle, we're coasting and picking upspeed.”

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Three submarkets accounted for 77% of the absorption that tookplace during the second quarter, NAI Hiffman found. The I-55Corridor led the way by absorbing 2,646,822-square-feet, boththrough leasing activity and build-to-suit completions. TheI-80/Joliet Corridor absorbed 973,462-square-feet and the SoutheastWisconsin submarket came in third by absorbing754,766-square-feet.

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The largest lease of the quarter was a build-to-suit leasefor tire manufacturer Michelin in theRidgePort Logistics Center in Wilmington. AndFerrara Candy Company leased the747,150-square-foot building located at 901 Carlow Dr. inBolingbrook. It was recently vacated by Home Depotfor its move to its new campus in the CenterPointIntermodal Center in Joliet.

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Investment and sales increased throughout the metro area duringthe second quarter. Several portfolio sales were completed, butWP Carey & Co., LLC completed the largest single building sale by purchasing for$47,208,000 the 824,624-square-foot building fully-leased to theJ.M. Smucker Company located at 300 Central Ave.in University Park.

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“Construction activity increased dramatically during the secondquarter, with 24 new projects breaking ground between April andJune,” the report noted. Developers have 43 projects underway, andspeculative development has also picked up, and now accounts fornearly half of the ongoing construction.

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The I-55 Corridor also leads in speculative construction.Developers in the submarket have a total of more than3-million-square-feet of new projects underway, 87% of which is ona speculative basis. The Southeast Wisconsin submarket followsclosely behind. Developers there have 2.8-million-square-feetunderway, and delivered a total of 3,572,185-square-feet during thesecond quarter.

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Brian J. Rogal

Brian J. Rogal is a Chicago-based freelance writer with years of experience as an investigative reporter and editor, most notably at The Chicago Reporter, where he concentrated on housing issues. He also has written extensively on alternative energy and the payments card industry for national trade publications.