Chicago industrial market has best leasing quarter since 2015
More than 10 million square feet of new leases or lease expansions were signed in Q3
Chicago’s red-hot industrial market is getting hotter, as there was more industrial leasing activity in the third quarter than at any point since 2015.
The industrial market saw 10.1 million square feet of new leases or lease expansions in the third quarter, according to a new report from Colliers International. That’s 1.5 million square feet more than was recorded in the second quarter and an increase of more than 4 million square feet year over year.
The flurry of leasing activity comes as Chicago’s industrial market is reaching highs not seen in decades. This year will likely set a new record in industrial investment sales, and construction in the market has skyrocketed.
The increased leasing activity, plus a decades-low vacancy rate, has led developers to jump into the market. Vacancy was at 6.4 percent in the third quarter, the lowest it’s been since 2001.
Some 26 projects totaling 7.2 million square feet got started in the third quarter — the greatest new construction start total since 2016, according to Colliers. Currently, 50 buildings totaling 14.7 million square feet are under construction.
Industrial development in the market has been buoyed by a desire among tenants for custom spaces. The third quarter’s three biggest new leases were for build-to-suit spaces totaling more than 2 million square feet, according to Colliers. Still, most of the new construction is speculative, according to Colliers.
The O’Hare area continues to be the hottest industrial submarket in the area. Vacancy dropped for a fifth consecutive quarter to 3 percent, another record for the market and the lowest of the area’s 22 submarkets, according to Colliers.
A strong economy and the rise of e-commerce has fueled the industrial market throughout the country, but especially in Chicago. Only Los Angeles and Atlanta have seen more large leasing activity than Chicago this year.