The Real Deal Chicago

Industrial strength: Big-box warehouse vacancies dipped in Q1: report

Less supply and added demand for large industrial properties is also pushing up rents
By John O'Brien | May 18, 2018 05:02PM

The Rock Creek Logistics Center near Joliet has 1.2 million square feet of available space (Credit: Opus Group)

The vacancy rate of big-box industrial properties in the Chicago area dropped for the first time in two years in the first quarter, one of several encouraging signs for the market.

In a report from Colliers International, big-box vacancies dropped to 9.2 percent in the first quarter, inching down from 9.6 percent in the fourth quarter. That was still still well above the 7.5 percent from the first quarter of 2017.

The amount of new supply and new construction dropped in the first quarter while leasing activity increased, and the period ended with net effective rents of $4.55 per square foot, up slightly year over year.

Colliers principal Brian Kling said the numbers were a good sign not only for owners of the properties in the report, but also for smaller properties. The properties were defined as modern distribution buildings of at least 200,000 square feet, with at least 28-foot ceilings.

“Providers such as distribution companies depend on these businesses for their own operations,” Kling said.

The report said the vacancy rates that had been rising for the past couple of years were a result of a large number of speculative deliveries. New supply in the first quarter dropped to almost 2.8 million square feet from more than 4.3 million in the fourth quarter.

Even with the improvements, big-box vacancies were above the 6.67 percent overall industrial vacancy rate for the market. Soaring e-commerce has bolstered the market, particularly near O’Hare.