Thank you for sharing!

Your article was successfully shared with the contacts you provided.

CHICAGO-Even with vacancy rates as low as 6% in more desirable locations, the local industrial market is described as “fickle,” with rent concessions creeping into lease negotiations. That is the report of Grubb & Ellis senior vice president Patrick J. Sullivan to a recent meeting of the Real Estate Investors Association.

“It’s really a fickle market at this point across the board, with a lot of people sitting on their hands,” Sullivan says. “Corporate America is nervous at this point. . . . Leasing is on-again, off-again all year. There’s a lot of tire kickers out there.”

Still, there are exceptions, Sullivan adds. “If it’s class A, the institutional buyers are out there in droves,” he says. “It’s very, very competitive.”

That’s because “most of the low-lying fruit has been picked,” Sullivan notes. The more desirable industrial product is either not for sale or being pulled off the market by sellers whose lofty demands are not being met. “Outside Chicago, the spread between buy and ask is so high that’s nothing’s happening,” Sullivan says. He predicts more owners may opt to refinance properties to raise cash rather than sell.

One type of deal that is happening, according to Sullivan, is the sale-leaseback as corporate decision-makers seek less of a financial commitment to space. Also, he has been finding the build-to-suit market fairly active as demand is shifting to fewer, larger facilities. And the suburbs are continuing to draw users away from the city, he adds.

“It’s getting to the point now where someone near the stockyards or on Crawford Avenue can get the identical space for the same amount of rent along I-55, but with all the bells and whistles,” Sullivan says.

Sullivan also predicts vacancies will continue creeping up in most submarkets while overall capitalization rates paid for newer properties will remain in the low- to mid-8% range. For older, and perhaps obsolete properties, Sullivan foresees cap rates above 10%.

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?

Dig Deeper

GlobeSt. NET LEASE Spring 2021Event

This conference brings together the industry's most influential & knowledgeable real estate executives from the net lease sector.

Get More Information

GlobeSt. NET LEASE Awards 2021Event

These awards honor the industry's most influential and knowledgeable real estate executives from the net lease sector.

Get More Information


Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.