Strong demand for warehouses and distribution centers in Chicago is forecast to surpass last year’s sales volume.
The city’s industrial real estate sales totaled $1.52 billion in the first half of this year, on track to blow past last year’s $2.13 billion in sales, according to data from CommercialEdge.
The country’s largest market for industrial real estate, Chicago recorded the most sales of any individual market with 150 transactions in the first half and average pricing per square foot of $67.
The largest industrial real estate sale this year was Silver Creek Development’s $130 million purchase of three buildings in Wilmington, Illinois, according to CommercialEdge. Michelin North America leases the two million-square-foot distribution center at 29900 South Graaskamp Boulevard, about 60 miles southwest of Downtown Chicago. Built in 2015, the property houses the tire manufacturer’s inventory for dealers and automakers in the Midwest and Western markets.
“The pandemic was a boom to e-commerce and leading to that movement, trucking and equipment gets used for e-commerce,” said Cary Goldman, managing partner at Timber Hill Group, a private equity firm specializing in logistics-related industrial real estate. “The hub is Chicago, the spoke is all the lines of the highways that go in every direction. So if you get something from the coast, it tends to come here because we are a consolidation point.”
The increased need for last-mile warehouses and distribution centers driven by strong e-commerce demand helped fuel Chicago’s industrial market since the pandemic took hold. Net absorption was 14.7 million square feet in the first half of the year, already surpassing last year’s total, according to data from Colliers International. The vacancy rate for industrial properties dropped to 6.29 percent in the second quarter of this year, from 6.68 percent in Q1.
While Chicago saw the most transactions, Los Angeles led all markets with slightly more than $2 billion in sales across 120 deals in the first half. New Jersey’s pricing was the highest of any market covered in the report, at nearly $200 per square foot, while Los Angeles followed at $190 per square foot.