Big Box Demand Fuels New Space Absorption Record in Chicago
The Chicago region’s big box vacancy rate fell 54 basis points to 8.53%, the lowest level since the second quarter of 2017.
CHICAGO—Strong tenant demand for big box industrial buildings in the Chicago region caused a surge in new leasing and tenant expansion activity that resulted in a new record of 17.4 million square feet of net absorption in 2019.
A newly released report by Colliers International states that last year’s net absorption easily eclipsed the previous record of 16.1 million square feet recorded in 2016.
The report, authored by Craig Hurvitz, VP, Chicago for Colliers International, notes that in 2019 big box leasing activity totaled approximately 20.75 million square feet, which included new leases and lease expansions, which was also a new high-water mark for the Chicago region.
The Chicago region’s big box vacancy rate fell 54 basis points to 8.53%, the lowest level since the second quarter of 2017. Developers introduced 40 new big box buildings to the market last year totaling 17.5 million square feet, the largest introduction of new product since 2017 when 20 million square feet of properties opened for business.
Of the 40 new buildings brought to market in 2019, 27 were built on a speculative basis totaling 11.5 million square feet. At the end of 2019, 33.5% of those properties were leased, which meant that 7.6 million square feet of vacant big box space was introduced and available for lease at year’s-end.
Hurvitz notes that even in the winter months of 2020, there are currently 30 new buildings of more than 200,000 square feet that are under construction totaling 12.4 million square feet. Of those properties, 21 are being built on spec totaling 7.1 million square feet.
In terms of the strongest market in the Chicago, area, Hurvitz points to the I-80 Joliet corridor, which posted net absorption of 5.7 million square feet in 2019, which was 33% of the market’s total absorption.
He said the I-80 Joliet corridor saw the greatest demand for space in 2019 and noted that the submarket also recorded the most new leasing volume for the year at 5.9 million square feet.