Rising rents and construction costs could cool Chicago’s industrial real estate market.
Developers are scrambling to find new land for warehouses as soaring demand pushes big developments further from Chicago’s city center, according to Crain’s. Supply chain bottlenecks are becoming an issue.
“The biggest risk is that uncertainty,” broker Matt Stauber, executive vice president in Collier’s Rosemont office, told Crain’s.
Companies looking to rent developed properties find themselves victims of the hot market.
“Many landlords are almost afraid to commit to deals, because if they wait another month, (rents) are going to go up,” Stauber said.
Near O’Hare International Airport, prices have climbed into the double digits from $8 per square foot a year ago, Crain’s reported, citing Stauber. About 50 million square feet of industrial space was leased last year.
Despite some leading headwinds, Craig Hurvitz, Colliers’ vice president of research for the Chicago market, told Crain’s he expects the all-time low vacancy rate of 5.39 percent, set in the third quarter of 2000, to fall this quarter.
E-commerce companies have been contributing to the surge in demand for industrial space. Amazon, Target and Wayfair have expanded into the Chicago market as online shopping increases. That’s had a trickle-down effect on logistics firms that service the e-commerce industry. At the end of last year, Apex Logistics leased a nearly 300,000-square-foot warehouse under construction in Bensenville.
Companies are also looking for bigger spaces. The number of leases over 500,000 square feet signed in 2021 more than doubled in number in 2019, according to Hurvitz. Earlier this year, Ridgeline Properties announced a 7-million-square-foot development project in the small town of Minooka, Ill.
[Crain’s] – Harrison Connery