Demand for big-box warehouse space in Chicago is stronger than ever, pushing vacancy rates to historic lows as the pandemic gives a boost to e-commerce.
A net absorption total of 27 million square feet during the nine months of this year already surpassed the 25 million-square-foot net absorption from all of last year, according to JLL’s industrial report. Tenants and landlords pushed vacancy rate to an all time low of 4.4 percent in the third quarter, slightly dropping from 4.9 percent between April and June.
U.S. Medical Glove inked the largest least in the third quarter, for nearly 1 million square feet at a former Caterpillar manufacturing plant in Montgomery, Illinois, about 40 miles southwest of Chicago. The I-88 submarket that includes Montgomery had the highest net absorption posted at 5.2 million square feet.
Developers are pumping out industrial space to meet demand. Around 27.8 million square feet are in the pipeline — more than double the 13.2 million square feet of warehouse space built this year. About 24 million square feet of new warehouses sprouted last year.
I-80 and Southeast Wisconsin submarkets are leading new construction, expecting 8 million and 5 million square feet respectively.
Chicago’s already strong industrial market has seen a boost in distribution centers and warehouses during the pandemic. Industrial real estate sales totaled $1.5 billion in the first half of this year, on track to beat last year’s $2.13 billion.
Chicago recorded the most sales of any individual market with 150 transactions in the first half and average pricing per square foot of $67.