About 18.5 million square feet of industrial space was under construction between July and September, an increase of more than 80 percent over the second quarter.
Most of the construction is speculative, and about half is localized along the Interstate 80 and I-55 corridors or in southeast Wisconsin, according to an Avison Young report.
“There’s still plenty of appetite out there for capital to come into the Chicago [industrial] market,” Avison Young principal Christopher Lydon said. “Developers are trying to put that capital to work to take care of the good demand that’s still out there.”
Early-stage construction of FoxConn’s $10 billion Wisconsin manufacturing campus deserves the bulk of the credit for the region’s dramatic quarter-to-quarter spike in construction volume, Lydon said. The project has boosted vendors in bordering Lake County, Illinois, which saw its industrial vacancy rate fall to 4.7 percent last quarter, according to the report.
Net absorption also climbed from 3.8 million to 5.3 million square feet, bouncing back from a slower second quarter and signaling an unquenched demand for warehouse space.
Average asking rents hit $4.66 per square foot for industrial properties across the region, up nearly 7 percent over the second quarter. The O’Hare, Lake County and East DuPage submarkets all posted average rents above $5 per square foot.
Lydon predicted large-scale industrial construction to slow down until more new space absorbs into the market, echoing a panel of industrial developers who last week pointed to a decline this year in sales of warehouse larger than 1 million square feet.