The strong, silent type: Chicago-area industrial market on the rise, report says

Marcus & Millichap’s 2018 forecast cites demand for warehouse space, especially in the suburbs

Chicago /
Apr.April 02, 2018 03:00 PM

(Credit: CenterPoint)

It may not be sexy, but it’s strong. Chicago’s industrial sector is climbing the national ranks, giving real estate investors a reason to take notice in 2018, according to a new report.

Chicago industrial rose to ninth place on a nationwide list of most desirable industrial markets in Marcus & Millichap’s 2018 North American Investment Forecast. That’s a jump of six spots over 2017 numbers.

Driving that uptick in the Chicago market are the continued demand for warehouse space, especially in the suburbs near expressways, and redevelopment of other industrial properties into other uses.

Average asking rents will rise to $5.74 per square foot by the end of 2018. That’s a 5.5 percent increase, after a 6.9 percent increase in 2017.

Industrial vacancy in the Chicago area will fall to 5.8 percent in 2018, according to the report, though construction will also be on the low side, it said. About 13 million square feet of new facilities will be built, the lowest number since 2014. That’s in an industrial market with more than 1 billion square feet, according to Globe St.

Sterling Bay, for instance is continuing its plans for a $10 billion mixed-use project on 70 acres of former industrial land along the North Branch of the Chicago River. And there reportedly are plans to convert some 190,000 square feet on Goose Island into apartments.

While Chicago retail real estate investment trusts have seen a drop in returns over the last year, the industrial side saw a jump, according to a recent report from SNL Financial. And nationwide, industrial REITs posted a 15.5 percent return over the past year, the analysis showed.


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