Amazon Subleasing New Chicago-area Facilities

Amazon is ditching its plan to operate warehouses in Chicago’s Bridgeport neighborhood and the western suburb of Addison that were planned to be used as distribution centers.

The e-commerce giant led by CEO Andy Jassy is subleasing the 112,000-square-foot facility at 2420 South Halsted Street, roughly three years after signing a deal to operate at the site, the Chicago Tribune reported.

Amazon’s lease began in August 2022, and the facility is available on a short-term sublease to companies for similar uses, according to company spokesperson Steve Kelly. The decision to hunt for a subtenant to come in and save Amazon on leasing costs was made as the company this year decided to cut back on renting and pivot further into owning the real estate it occupies.

Amazon opened new distribution centers at a frenetic pace in light of the pandemic and the increase of online shopping. The company has scaled back some plans, though. It closed smaller facilities in Elgin and Mundelein and is also marketing a 189,000-square-foot warehouse in Addison for sublease.

The company’s binge helped Chicago’s industrial sector thrive, especially compared to other factions of the commercial market, as warehouse vacancies fell to an all-time low to start the year. Plus, a handful of developers are redeveloping old business parks for industrial use, like Dermody’s $232 million redevelopment of the former All-State campus in Glenview.

However, the city’s industrial boom is starting to slow down a little bit, according to Craig Van Pelt, Cresa’s head of research.

The crowd of buyers has thinned since interest rates started rising last year, squeezing profit margins for real estate players as borrowing costs soared. The Chicago-area’s industrial market was down to $392 million in industrial sales volume in the first quarter of this year, marking a 58 percent decrease in volume compared to the same time last year, according to NAI Hiffman.

“The market is still really hot, but I think it’s taking a breath,” Van Pelt told the outlet.

In 2020, when Amazon’s zoning proposal was under review by the Chicago Plan Commission, the project received pushback from a coalition of neighborhood and environmental justice groups, such as the Little Village Environmental Justice Organization and the Southwest Environmental Justice Coalition. They claimed that the area was already being taken over by other logistics and industrial facilities, and the project would add to pollution and traffic concerns.

The company said its decision to sublease wasn’t tied to the pushback it received. Rather, Amazon was “always evaluating our network and making adjustments to best fit the needs of our business and customers,” Kelly told the outlet. He added that the space in both Bridgeport and Addison “may still factor into our future plans.”

— Quinn Donoghue