Chicago Industrial Market Bests 19-Year Vacancy Record Low

By John Jordan

​CHICAGO—Bolstered by strong leasing activity, the industrial vacancy rate for the Chicago region in the third quarter dropped to 4.9%, besting the 19-year record low of 5% recorded set in the second quarter of this year.

According to a report released by Cushman & Wakefield, third-quarter leasing activity totaled 25.9 million square feet, nearly half of which was concentrated in the Interstate 55 and Interstate 80 corridors, as well as southeast Wisconsin.

The average asking net rent in the Chicago region remained essentially unchanged from the second quarter, at $5.42-per-square-foot, above the year-earlier figure of $5.34-per-square-foot. The region scored the 35th consecutive quarter of positive absorption at 6.8 million square feet.

“As we head into the final months of 2019, signs point to yet another year of growth for Chicago-area industrial activity,” says Jason West, vice chair, on Cushman & Wakefield’s Chicago industrial team. “Firms like Crate & Barrel, which recently reported that nearly half of its sales are now online, continue to drive demand for large-scale distribution centers with easy access to consumers.”

He adds, “We’ve already seen more of these big-box deals in 2019 than during the same period last year, and with several others expected to close by year’s end, we’re confident in the market’s ability to absorb the new supply.”

In the report, Cushman & Wakefield states that eight new big-box leases of more than 500,000 square feet were executed in the first three quarters of 2019, compared with four for the same period in 2018. Additional transactions expected to close in the fourth quarter will likely keep big-box leasing volume ahead of last year’s levels, according to the report.

“Many of these big-box users are increasingly exploring how automation can improve their bottom line, which helps explain the need for larger buildings with increased power loads, higher ceilings, expanded loading and trailer parking and other features that are not only in demand, but expected,” West says.

Construction activity remained strong across the market in the third quarter, with year-over-year completions totaling 14.8 million square feet, a 56.5% increase from third-quarter 2018. An additional 17.8 million square feet is under construction, nearly 60% of which is being built on a speculative basis, Cushman & Wakefield reports.