While Chicago’s commercial real estate market is experiencing a bit of a cold spell, industrial vacancies are still on the way down.
The industrial vacancy rate in Chicago fell to another record low of 4.5 percent in the fourth quarter of 2022, Crain’s reported. That marks a drop from the 4.54 percent vacancy in the third quarter and the 5.44 percent vacancy rate at the end of 2021.
Data from Colliers International found that, even though local industrial demand dropped a little bit last year, the market is still experiencing an historic boom.
In 2022 developers broke ground on an unprecedented number of industrial warehouses in the Chicago area totaling 31.8 million square feet and 88 buildings. The projects were on a spec basis — meaning there wasn’t a specific tenant in place prior to construction — and eclipsed the most recent record of 22.2 million square feet started in 2021. And another local industrial player, Bridge Industrial, was reported this week to be nearing a deal to buy an old suburban Chicago office campus from Baxter International to turn into a massive new warehouse park, highlighting the heat behind the industrial market compared to the freezing cold office market.
In May, The Real Deal reported that Chicago’s supply of industrial real estate kept shrinking, setting new record lows. According to the 2021 Colliers report, industrial tenants sank the Chicago area’s vacancy rate in buildings of at least 200,000 square feet to just 2.6 percent in the first quarter last year, a historic low.
Developers have responded by putting large development projects into the pipeline to help balance the market by adding supply. Right now, Chicagoland has more than 30 million square feet of spec industrial space under construction and only 10 percent of it has been leased ahead of time. The local vacancy rate for recently completed industrial space rose slightly to 10.1 percent in the fourth quarter of 2022, up from the most recent low of 7 percent in the first quarter of 2022. That number is still significantly lower than the 30.7 percent vacancy rate for spec industrial space Chicago had in 2019.
— Victoria Pruitt
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