The Chicago industrial market hit the brakes on new deliveries in the fourth quarter of 2019, after millions of square feet had come online earlier in the year. Construction, however, has not stopped.
From October through December, 364,548 square feet of new supply was delivered in Cook County, compared to 1.5 million square feet over the same period in 2018, according to NAI Hiffman’s new fourth quarter industrial market report. Net absorption also cratered, to 310,000 square feet, from about 1.3 million at the end of 2018.
But amid the 76 percent drop in new deliveries in Q4, total square footage for projects under construction increased. Five million square feet of new space was under construction, a 31-percent rise from the 3.8 million square feet in the works over the same period in 2018, NAI Hiffman reported.
Chicago is still among the most dominant industrial markets in the country, and the lack of new supply led to a slightly lower vacancy rate for the fourth quarter of 2019: 4.72 percent compared to 4.76 percent in 2018.
Likewise, there was 24.8 million square feet of vacant industrial space in Cook County from October through December, down slightly from 25.1 million square feet over the same period in 2018.
The falloff in new deliveries was felt across the region last quarter. NAI Hiffman’s broader fourth quarter industrial report includes part of Illinois, southeast Wisconsin and northwest Indiana. In that three-state “Chicago area” region, it noted that more than 3 million square feet of industrial product was delivered in the last three months. That was down from the third quarter’s 7.3 million square feet of new space.
Michael Flynn, NAI Hiffman chief operating officer, said when taking into account the tri-state region, he was optimistic about the year ahead.
“I think it’s set up really strongly for 2020 based upon the velocity of deals being signed,” he said. Flynn added he expects to see more spec warehouse projects rather than build-to-suit.