Is Chicago’s industrial market in danger of overheating?

With rents hitting all-time highs and vacancy rates at their lowest in nearly two decades, the Chicago industrial market is very hot.

But millions of square feet of inventory are in the pipeline, and most of it is being built on spec. That suggests the market is in danger of oversupply, according to a new report from Transwestern analyzed by Re Journals.

The report said more than 7.3 million square feet of new construction has been completed this year, 65 percent of which is still vacant and available for lease. More than three-quarters of the nearly 10 million square feet of industrial/flex building development now in the pipeline is expected to deliver vacant, according to the report.

Absorption slowed in the second quarter to 730,000 square feet, down from 3.8 million square feet in the first quarter. But a number of submarkets remained strong, including Central DuPage/Kane and Interstate 55.

While the additional inventory set to deliver could slow industrial rents, right now they are soaring. Asking rents hit a record high of $5.58 per square foot in the second quarter, according to a recent Newmark Knight Frank report.

The vacancy rate, meanwhile, hit a 17-year low of 6.44 percent in the second quarter, according to a Colliers International report. [RE Journals] — John O’Brien