Strong Demand Continues for Big-Box Sector in Chicago
The seven new spec buildings were delivered 78% vacant, adding 2.6 million square feet of new vacant space to the big box market.
CHICAGO—Strong demand could not totally make up for the seven speculative, mostly vacant big-box projects delivered in the second quarter in the Chicago region, according to a report released by Colliers International.
Demand for big-box properties yielded a positive net absorption of approximately 3.1 million square feet, according to Colliers VP | Chicago Craig Hurvitz. However, despite strong leasing interest, the big box vacancy rate rose nine basis points in the second quarter to 8.62%. The seven new spec buildings were delivered 78% vacant, adding 2.6 million square feet of new vacant space to the big box market. Eight big box projects totaling 3.6 million square feet were completed during the second quarter of 2019, seven of which were developed on spec, these. Colliers International report states.
The new construction pipeline in the Chicago area is impressive. A total of 27 buildings totaling 13.8 million square feet are now under construction. Eleven of these projects are greater than 500,000 square feet, which Hurvitz says is indicative of large-footprint users returning to the Chicago market.
“New leases and lease expansions in big box buildings totaled 4.0 million square feet among 22 leases during the second quarter of 2019, bringing the year-to-date total to 8.9 million square feet among 45 leases,” Hurvitz states in the report.
The largest lease transaction in the second quarter was the 549,588-square-foot sublease by Wholesale Interiors at 2805 Duke Parkway in Aurora. Coming in at number two was the 524,339-square-foot new lease transaction at 2601 128th Ave. in Kenosha with Silgan Containers LLC.
Some other noteworthy data points from the report include:
• The vacancy rate increased among buildings 500,000-749,999 square feet to 8.11% and among buildings greater than 750,000 square feet to 8.17%, but decreased by 74 basis points to 9.08% among buildings 200,000 square feet to 499,999 square feet. Nearly 62% of the net absorption recorded during the second quarter of 2019 occurred in this size segment.
• Net absorption totaled 3.1 million square feet in big box buildings between April and June, bringing the tally for the first half of 2019 to 8.9 million square feet. This total outpaces the 7.0 million square feet of net absorption recorded during the first half of 2018 and the 8.4 million square feet of net absorption recorded during the first half of 2017.
• The largest active development project is a 1.5-million-square- foot build-to-suit facility being developed by Seefried Industrial Properties for Diageo North America in Plainfield.
• Five speculative buildings larger than 500,000 square feet are under construction, the largest being a 879,040-square-foot building being developed by LFI Real Estate in Monee’s Bailly Ridge Corporate Center.