Chicago can’t build warehouses fast enough to meet surging demand

As 16.4M sf of new industrial space sprouted, vacancy rate is lowest on record

Chicago can’t build warehouses fast enough to meet surging demand
Amazon warehouse in suburban Markham and Matteson (Amazon)

Here’s the down side to booming demand for industrial property in Chicago: builders can’t keep up.

That’s according to a Colliers International report that showed 16.4 million square feet of new warehouses sprouted in the third quarter, almost double a previous record set two years ago, as the vacancy rate for speculative space dropped to an eight-year low of 13.4 percent.

“Demand is through the roof,” said Craig Hurvitz, the firm’s vice president of market research. “We are not only seeing users consolidating and growing in the market, but we’re seeing new users come into the Chicago market that’s never had a presence before.”

While speculative completions represented only about a third of what was built in the period, the 5.2 million square feet was also a high for the quarter. Tenants leased 4.9 million square feet of spec buildings between July and September.

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Build-to-suit made up 68 percent of industrial space built during the three-month period. Of 24 projects, eight fit that category, totalling 11.2 million square feet. They include two five-story Amazon warehouses in suburban Markham and Matteson that contain 7.2 million square feet.

Some 24.6 million square feet was under construction in the third quarter. The largest building was a 1.2 million-square-foot facility for furniture e-commerce company Wayfair on Renwick Road in Romeoville. That project is expected to open in mid 2022.

The increased need for last-mile warehouses and distribution centers driven by e-commerce demand fueled the industrial real estate market in Chicago this year. Industrial real estate sales totaled $1.52 billion in the first half of this year and are set to surpass last year’s $2.13 billion.

Silver Creek Development’s $130 million acquisition of a Michelin warehouse property in Wilmington is the largest industrial sale in 2021.