Chicago industrial rent at all-time high as vacancies drop

Chicago industrial rents seem to have nowhere to go but up.

Rents surged 17.3 percent in the fourth quarter from a year earlier to a record of $5.90 per square foot, according to Savills. That’s up from $4.90 in the same period of 2020.

E-commerce companies are scrambling for warehouse space and distribution centers amid rising pandemic-era demand. 

Logistics and distribution firms signed leases for 50.3 million square feet of industrial space last year, a 7.7 percent increase from the previous year. More than 17.1 million square feet of net absorption, the amount of space newly occupied minus the amount vacated, was posted last year, cruising a previous high set in 2020.

In the largest deal of the fourth quarter, Central Steel & Wire leased a 897,000-square-foot build-to-suit construction in University Park, 30 miles south of Chicago. No. 2 was Diageo North America’s 800,000-square-foot-lease renewal in Bolingbrook, 29 miles southwest of Chicago.

Active leasing for industrial space drove down availability. The vacancy rate from October through December dropped to 8 percent from the final quarter of 2020, below the 8.6 percent pre-pandemic level.

To keep up with demand, about 28.5 million square feet of big box warehouses are being built, the most in at least 25 years. Developers are betting on outlying territories with about half of all current projects developed in the submarkets of Joliet and Kenosha.

Local industrial real estate developer CenterPoint Properties is building a pair of one million-square-foot properties at its Intermodal Center in suburban Joliet and Elwood. NorthPoint Development plans on completing its 750,000-square-foot speculative development in Kenosha early this year.

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