Chicago’s Industrial Market Heated Up in Fourth Quarter
JLL states in its year-end 2019 report on the Chicago industrial market that after some nervousness earlier in the year, large occupiers returned to the market.
CHICAGO—The Chicago industrial market saw a host of large deals in late 2019 that stabilized the overall vacancy rate at 6.1%, according to a report released by brokerage firm JLL.
JLL states in its year-end 2019 report on the Chicago industrial market that after some nervousness earlier in the year, large occupiers returned to the market. Among those large requirements included Amazon, which is making a big push in multiple markets.
Among the larger transactions in late 2019 were Harbor Freight Tools’ 1.6-million-square-foot build-to-suit deal in CenterPoint Intermodal Center Joliet. Target, which signed a 1.2-million-square-foot deal in Joliet in the third quarter, pre-leased nearly another 1 million square feet of space with Hilco Development Partners in Chicago.
The Chicago industrial market ended 2019 with a 6.1% vacancy rate. However, the market has made steady improvement since 2013 when the vacancy rate stood at 8.8%. The average asking rent at the end of 2020 was $5.08-per-square-foot.
In 2018, the market posted 24 million square feet of absorption. Last year, the market again registered another positive 18 million square feet of absorption. Net absorption in the fourth quarter stood at 3.96 million square feet.
At the end of 2019, a total of approximately 19.5 million square feet of industrial space was under construction, higher than the 14.3 million square feet that had broken ground in 2018.
While JLL states that the absorption levels of 2018 will be hard to beat, the brokerage firm believes the market is on the right track for continued strong activity in 2020.
“We see the investment marketplace as robust with several groups looking to expand their footprint in the region, such as MetLife, LBA Realty and Morgan Stanley,” JLL states in the report. “Meanwhile other new entrants to the marketplace like Starwood Capital made a big splash with the recapitalization of Becknell Industrial and UBS assets.”
JLL notes that investors have shown that they are willing to take risks and purchase partially-leased speculative buildings.
“While the manufacturing industry is facing some slowdowns, we see healthy conditions moving into 2020, which could shift leverage into landlords favor,” JLL notes in the report.