CHICAGO—Exel and JLL will unveil this week a proposed distribution building for Joliet of over 1 million square feet and 40' clear heights, a rare quality in the one billion square foot Chicagoland industrial market. JLL officials say they expect to secure a capital partner that will close on the land and fund the roughly $55 million development at 1151 E. Laraway Rd. in the master-planned Exel Campus I-80, and Exel, a leading supply chain management company, will build the building.

“This building is different than what has usually been constructed in the Midwest,” JLL international director John Huguenard tells GlobeSt.com. During the last five years, for example, 42 bulk distribution centers have been built in the Chicago region, and 72% have 28' to 36' clear heights. Only two buildings have heights of 36' to 40' and only two have heights over 40'. But JLL and Exel have surveyed the market and feel that strong demand exists for such product. “A lot of the e-commerce firms and retailers are continuing to push the box higher and higher.”

Huguenard is also confident that deep-pocketed investors will jump at this chance. “A lot of institutional capital is chasing product like this,” he says. But with all the competition, public REITs and the like are having a tough time finding existing properties to invest in and an increasing number are willing to fund speculative buildings and “take on a little more risk.”   

This is especially true for properties within core markets like Chicago “with the vacancy rate as low as it is and the amount of leasing activity out there.” The regional vacancy rate has sunk to just 7.6%, according to JLL, after roughly 6.1 million square feet of positive absorption in the second quarter.

And the I-80 submarket around Joliet has been one of the most active. Earlier this year, for example, Saddle Creek Logistics Services' decided to relocate from a 590,000 square-foot facility in Elwood, IL, and lease a new 1,114,575 square-foot build-to-suit distribution facility at CenterPoint Intermodal Center in Joliet. And Amazon.com Inc. recently announced it would open a nearly 500,000 square foot fulfillment center in an existing warehouse in Joliet's Laraway Crossings Business Park.

Citing Costar, a JLL market overview states “there are only five available properties between 500,000 square feet and 699,999 square feet and only one property currently available greater than 700,000 square feet in the entire Chicagoland area, with a clear height of 32' or higher.” Furthermore, “at the midpoint of the year, there are currently 16 tenants who are seeking space 500,000 square feet or greater across metro Chicago,” and “the average size of space that these tenants are looking for is approximately 815,000 square feet.”

Exel's new project is designed to meet the needs of modern distributors, Huguenard says. In addition to the 40' height, which will allow three levels of racking instead of just two, the center will have 480 stalls for auto parking and 270 stalls for trailers, giving the user the capability to have “a high throughput of product.”   

Huguenard expects to announce a capital partner around the start of the fourth quarter, and Exel should finish the project by the second quarter of 2016. JLL is working on similar projects in Columbus, Louisville and Kansas City, and also around the US. “It's not just a Midwest phenomenon,” he says. The company predicts that vacancy rates will continue to fall and investors will be even more willing to fund speculative buildings. “There is not enough A product out there to buy.”