Although it has seen a great deal of construction in the past few years, users still demand more space in this hot distribution center.

CHICAGO—Developers throughout the US continue to break ground on new warehouses located as close as possible to the bulk of online retailers' customers, and with manufacturing beginning to grow again, the Midwest industrial market is growing at a strong pace, according to Avison Young's Spring 2018 Industrial Market Report for North America and Europe. The report covers 59 global markets.

Several Midwest cities, including Chicago, Nashville, Indianapolis and Detroit, are seeing a significant boost in industrial demand and development.

Chicago's industrial market continues to register tremendous demand, with tenants absorbing 22 million square feet during the past 12 months, a 28% increase from the previous year. Following a record breaking year of construction in 2017 — with 21 million square feet delivered — the first quarter moderated, with just under 10 million square feet underway, according to Avison Young.

As with other top industrial markets, developers are now shifting to infill locations in Chicago, primarily in the O'Hare submarket, in their quest to find suitable land for development.

In Nashville, the industrial market growth continues unabated. The market currently has 3.5 million square feet under construction, of which nearly 80% is speculative. At the heart of this economic growth is e-commerce.

“Nashville is strategically located and has become an integral part of supply chain logistics serving the eastern United States,” says Sue Earnest, an Avison Young principal in Nashville.

In the last five years, the market's industrial asking rental rates rose 57%, the largest of all commercial sectors in Nashville. “While the statistics may not show it yet, we're finding some landlord's more negotiable on rates and/or incentives — a sign that the pace of rising rental rates may be beginning to plateau,” Earnest says

The Indianapolis industrial market has been a hot distribution hub or several years and is continuing to expand, adding nearly 7.4 million square feet to the market over the past 12 months, through the first quarter of 2018. There also is more than 5.2 million square feet in the pipeline, signaling developers' confidence in the market to continue to attract national and regional e-commerce and corporate distribution tenants.

However, there is concern that a shortage of skilled labor could restrict growth in the industrial sector. State officials have responded with a $1 billion workforce development program to counteract the labor shortage. With a low 2.9% vacancy rate in the first quarter, Indianapolis has 5.2 million square feet of industrial product under construction.

Instant Insights /

Developers Still Bullish on Midwest Industrial Markets

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