CHICAGO—The industrial market has tightened up considerably across the region, with the vacancy rate hitting its lowest point since 2001, and few areas are in as much demand as the O'Hare submarket. Several companies have recently completed speculative projects near the airport, and tenants generally snap up space as it becomes available.
Brennan Investment Group, LLC just became the latest to fill up a big chunk of speculative space in the submarket by signing a new lease with Pet Food Experts for 98,785 square feet at its newly constructed warehouse building in suburban Des Plaines at 1780 Birchwood Ave. The lease will commence in the third quarter. A little more than 40,000 square feet remains available.
“We have a couple of active prospects looking at the remaining space,” Scott McKibben, the Chicago-based company's co-founder and chief investment officer, tells GlobeSt.com. The fact that the area's new buildings “have been fairly quickly absorbed into the market” makes him confident that Brennan will soon fill the rest.
The building features 32' clear height, ample loading, trailer parking, and auto parking. It was designed to handle warehousing, assembly, and distribution uses, and was built to a LEED standard. The Colliers International team of Jonathan Kohn and Thomas Rodeno represented Brennan in this transaction, and Daniel Smolensky of Modal Group represented Pet Food Experts. Keeley Construction was Brennan's general contractor.
At the end of the first quarter, the metro region's vacancy rate was 7.59%, down 14 bps from the fourth quarter volume of 7.73%, according to Colliers. And the rate in the O'Hare submarket largely remained steady at 5.97% after 630,500 square feet of construction deliveries in the fourth quarter.
Furthermore, “in the last six to twelve months we've seen a lot of push on rental rates,” McKibben says, giving him further confidence that speculative construction can continue. And this upper pressure is occurring in older class B structures as well as class A buildings like 1780 Birchwood Ave. “It's happening across the board.”
Kevin Brennan, vice president of acquisitions at Brennan, spearheads the company's new development and says it is currently pursuing several opportunities in secondary markets throughout the US. But the company plans to keep an eye on the Chicago market as well, especially around O'Hare where it operates many properties and has a lot of local knowledge.
However, he adds, building here can be tough because there is relatively little land available, especially in a mature submarket like O'Hare. "We need to be selective and think creatively when exploring spec development in more mature, primary markets where land prices are rising and developers are abundant. We tend to pick our spots.”
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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.
