Boston’s TA Realty drops $70M on O’Hare industrial portfolio

Industrial property values near the O’Hare International Airport are taking off.

An affiliate of Boston’s TA Realty picked up a 21-building portfolio for $70 million, netting seller Stockbridge $27 million more than what it paid for the properties in 2019, without accounting for any capital it poured into the property during its ownership, according to Cook County public records. Colliers’ Jeff Devine and Steve Disse represented Stockbridge in negotiating the deal.

Colliers’ Jeff Devine (Colliers)

“This portfolio presented a unique opportunity to invest in a complementary collection of small bay industrial units that have always been in high demand from companies in the O’Hare area,” Devine said in prepared comments, also citing the property’s location near the airport and the center of the Chicago metro area.

Colliers’ Steven Disse (Colliers)

The O’Hare submarket is one of the top hotspots for industrial demand within the Chicago metro area, with a 1.7 percent vacancy rate, down 10 basis points from Q2, according to a third-quarter report from Colliers. With little space to build, there are eight buildings under construction in the submarket. Those properties, which total 1.8 million square feet and comprise the most space being developed at one time in the submarket’s history, are set to deliver in the next 18 months and are 89 percent leased, according to the report.

Industrial real estate — a darling asset class of the pandemic — functions differently near O’Hare than many other markets, because the area’s stock of buildings is older and smaller, consisting of properties spanning tens of thousands of square feet rather than the hundreds of thousands of that most developers and occupiers focus on today. High demand for the smaller buildings near O’Hare is a factor of the airport’s importance as a shipping node and tenants often needing any amount of space they can get in the area, even if less than preferred.

One of the buildings is at 1421 Elmhurst Road in Elk Grove Village and the entire portfolio spans 43 acres. The buildings total 760,000 square feet and were 97 percent occupied by 107 tenants that ranged in size from 2,700 square feet to 21,500 square feet when the sale took place, according to Colliers.

Due to the O’Hare submarket’s tight vacancy rate, the area’s net absorption for industrial properties continued on a downward trajectory. The net absorption total last quarter was 143,119 square feet, bringing the year-to-date total to 993,095 square feet. The area saw 970,000 square feet of industrial leasing last quarter.

TA Realty has been on a purchasing streak of industrial property including a $241 milion, 12-warehouse deal it completed last month in the Miami area.

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