Chicago has by far the sharpest uptick in construction timelines on industrial projects amid a nationwide surge in project delays.
Challenges on all fronts, from finding and retaining labor, obtaining materials at rising prices amid record inflation, supply chain disruptions and growing community opposition toward building, are contributing to the slowdown, a Newmark report said.
It’s not good timing: Record-low vacancy in industrial properties in Chicago and nationwide has fueled historically high demand for newly built space, especially big boxes of 200,000 square feet or more. With more such projects in the development pipeline than ever before in the Chicago area, the competition has heated up and also played a role in price hikes.
]“Materials awful hard to come by for development,” Colliers industrial broker Jeff Devine told The Real Deal earlier this year.
Chicago’s timelines from a project’s entitlements to completion are up 80 percent compared to the pace of 2019, the Newmark report said, far and away the biggest slowdown out of the 15 markets studied. Boston’s elongation of construction was the next worst, at 51 percent longer.
“For multiple reasons, it’s more difficult to build,” Chicago Avison Young broker Adam Haefner said. “We’re seeing more pushback from municipalities, we’re seeing increases in interest rates, increase in construction costs. It’s harder and more time consuming to put buildings up, which will help keep supply in check.”
Longer construction periods will constrain new supply despite a huge rise in new development. Industrial construction starts increased 64 percent across the nation between 2019 and 2021 to meet tenant demand that more than doubled, yet completions increased less than 6 percent during the same period, Newmark found.
“Every stage of the construction timeline from the entitlements process to the active construction schedule has been hampered by two years of challenges that are unlikely to subside during the balance of 2022,” the report said.
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