Strong Local Economy Fuels Industrial Market

CHICAGO-Sales and lease transactions in metropolitan Chicago’s industrial market totaled 4.9 million-sf, according to a CB Richard Ellis report. At this rate, gross total absorption for the year 2000 now totals 20 million sf. According to Patrick McCourt, a SVP with CB Richard Ellis, “With a strong finish, we could see absorption in excess of 30 million sf for the seventh consecutive year.”

The Chicago area’s industrial market is one of the nation’s largest with a property base estimated to be over 900 million sf. Distribution and manufacturing uses claim the largest shares of this total. The Chicago metropolitan area remains one of the fastest growing regions in the country. The area’s central location and its efficient transportation routes add to its attractiveness, according to the Studley Report. Year-to-date, about 42,400 new jobs have been added to the Chicago market. A tight labor market potentially could slow future growth.

At this point, increased production equals increased demand for warehouse space. There was a time when buildings and leases totaling 200,000 sf to 300,000 sf were considered major deals. Now, leases of 300,000 sf and larger have become more commonplace.

The CB Richard Ellis report states that the vacancy rate in third quarter 2000 increased to 7.5% from 7%. New construction starts for the year so far have topped 9.6 million sf. Projects begun in 2000, primarily high-cube warehousing, include 6.2 million sf of speculative space and 3.4 million sf of build-to-suit.According to the Grubb & Ellis Industrial Market Trends report, Chicago’s industrial market sprawled into the far south and west suburbs after the Elgin-O’Hare (northwest) area became too crowded. Low taxes and government incentives (TIFs) sparked growth in the I-55 corridor. Suburbs such as Bolingbrook and Romeoville have grown rapidly.

The next leap has begun in the I-80 corridor for major warehouse and distribution users. From the Indiana border to Joliet, IL, the interstate highway joins three of the major arteries that run through the Chicago area, I-55, I-57 and I-94. According to the Studley Report, as the Chicago area’s industrial base surges, the geographical market boundaries will be redefined as far as 50 miles from Chicago’s CBD. One example of this is Catellus Development Corp.’s 400,000-sf spec facility on 80 acres of a 380-acre property it acquired in Minooka, IL.