More Buyers Than Sellers for Industrial Property
Smaller buildings can be especially attractive, as developers have concentrated on building larger distribution centers.
CHICAGO—Investors now look upon this metro area as one of the best locations to buy industrial property, and many significant deals have already been made this year. A team from JLL Capital Markets recently completed the sale of a 1.17 million-square-foot, 11-property portfolio of buildings across the Chicago suburbs on behalf of an institutional client. Boston-based High Street Realty Co., LLC paid $86 million for the 86% leased portfolio on behalf of High Street Real Estate Fund V, LP.
“They already have a good foothold in Chicago,” John Huguenard, international director at JLL, tells GlobeSt.com. High Street typically buys up buildings in four hubs vital to the nation’s supply chain: Chicago, Atlanta, Dallas, and Philadelphia-NJ. And as the company recently sold a national portfolio, including many Chicago properties, to Blackstone REIT, picking up these healthy Chicago-area properties fits in quite well with its national strategy.
Huguenard, along with Sean Devaney, managing director, and Ed Halaburt, senior vice president, led the JLL team on the transaction, along with assistance from local market experts such as Steve Trapp and Steve Ostrowski.
The portfolio includes seven fully-leased buildings in Lake County. They are: 801, 901 and 1001 Technology Wy. in Libertyville and 900, 909,1000 Asbury Dr. and 911 Commerce Ct. in Buffalo Grove. Additionally, a 74,024 square foot building at 1001 Asbury Dr. will be available for lease as of July 31. The portfolio also includes two assets in the I-55 submarket: 101 Corporate Center in Lemont and 755 Remington Blvd. in Bolingbrook. It is rounded out by 2050 Hammond Dr., a 66,557-square-foot building now available for lease in Schaumburg in the Northwest Cook County submarket.
The portfolio attracted many potential buyers, and for good reasons. “The buildings in Libertyville have been 100% leased for 15 years,” Halaburt says. Furthermore, the previous owner spent what was needed to keep the buildings well-maintained. High Street can now add value without having to spend a lot on renovations or deferred maintenance.
The buildings’ smaller size also probably helped. “The development pipeline has ignored this segment,” Halaburt says. As a result, Huguenard adds, these buildings have “seen better rent appreciation due to a lack of inventory.”
Tenants have been active in all three submarkets. Lake County has experienced seven consecutive quarters of positive net absorption and has a vacancy rate lower than the metro’s overall average, according to JLL. The I-55 submarket has been the region’s most active market, accounting for 17% percent of all leasing volume over the past three years, and Northwest Cook County has seen less than one million square feet of new industrial development in the last decade.
“There are more buyers than sellers right now,” Halaburt says.