Interstate 55 Submarket Absorbs Tenants

BOLINGBROOK, IL-A lack of development in the Interstate 55 industrial market, most known for its large distribution center boom in mid decade, is now allowing improving absorption and better occupancy, according to a recent third quarter Grubb & Ellis report. With no new mega-box centers planned, the submarket that includes Bolingbrook, IL had the highest amount of absorption at more than 1.7 million square feet in Q3.

Just five years ago, speculative projects abounded in the region, at the intersection of I-55 and I-355, near the intermodal growth area of Joliet but closer to Chicago. The recession ended such new projects, but leasing persists, says Jack Cozzie with Grubb & Ellis’ Global Logistics Group. He and Jim Cummings report more intense leasing activity recently, with the pair handling more than one million square feet of deals in the I-55 corridor. “There’s been good activity, with us and other firms. About 12-18 months ago, showings were nothing more than that, where the parties then regrouped and nothing happened. Now we’re seeing things move forward,” Cozzie tells GlobeSt.com.

The I-55 corridor is now at 11.3% vacant, a number not seen since the fourth quarter of 2007, Cummings says. “There’s really no land left,” he says. “Because the spigot of spec development was cut off, we’re seeing more acceleration.”

The team just recently represented Kohler Co. in the lease of 195,000 square feet of distribution space at Liberty Business Center in Aurora from Liberty Property Trust, as well as representing ownership in the sale of a 101,088-square-foot freezer-cooler and distribution facility to Supreme Lobster & Seafood Co. Cozzie says food companies continue to be interested in the corridor, due to the availability of a few cold-storage properties. “That market’s very strong. America’s still eating their fair share of food,” he says.

Chicago’s industrial market improved to an 11.9% vacancy in the third quarter, up 20 basis points, according to Grubb & Ellis. The rate was assisted by just one building being under construction, a 32,000-square-foot expansion for a drug company in Burr Ridge, IL.

The only bad news in the market, including the I-55 submarket, is the decline in sale prices. Deals are closing at lower-than-expected levels, fueled in part by the inability to secure financing. Combined with an increase in industrial properties for sale, asking prices for warehouse and distribution property has dropped to less than $4 per square foot, almost a $2 per square foot drop since a slight peak in Q2 2009.