The Real Deal Chicago

Improved big box industrial leasing activity spurs new warehouse development

Vacancy rates in the large-scale warehouse sector dropped for a second straight quarter

By Joe Ward | August 16, 2018 11:00AM

(Credit: iStock)

A flurry of leasing activity in the big box industrial sector caused vacancy rates to drop and developers to get back into the market.

There were 19 new big-box warehouses leases signed in the second quarter totaling 4.1 million square feet. That marks the greatest quarterly leasing volume in two years, according to a Colliers International report.

Vacancy rates for the big box industrial spaces — or warehouses larger than 200,000 feet with a height of at least 28 feet — dropped to 9 percent in the second quarter, down from 9.2 last quarter, the report stated. It’s the second straight quarter of declining vacancy rates, but the number is still higher than the 7.7 percent vacancy rate seen in the second quarter of 2017.

Vacancy for this sector is higher than last year’s because of a large number of speculative deliveries in that span. But as leasing activity has picked up, so too has large industrial warehouse development, according to the Colliers report.

New supply dropped off significantly this year, with about 2.8 million square feet of new large warehouse space delivered in the first quarter compared to 4.3 million in the fourth quarter of 2017. Only 3.3 million square feet of new inventory was delivered in the second quarter, but there is more on the way.

The total number of under construction big box warehouse projects hit 19 in the second quarter, totaling 7.3 million square feet, the most in three quarters, according to Colliers. Eleven of those projects were started between April and June.

The biggest project to get started in the second quarter is CT Realty Investor’s two-building, 1.3 million-square-foot speculative development in the Interstate 55 Logistics Park In Romeoville.

Chicago’s industrial market has been firing on all cylinders for some time now, boosted in part by the continued rise of e-commerce and the resurgence of the O’Hare submarket.