Chicago-area Industrial construction reaches record levels, driven by Amazon and COVID-19

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Despite (or perhaps because of) the COVID-19 pandemic, industrial construction is booming in Chicagoland, according to a recent Colliers International market report.

Developers set a record for new space under construction in the last quarter of 2020, the report said. Builders were constructing 29.6 million sq. ft., compared to the 23.7 million sq. ft. under construction in the third quarter.

Most of this new product consists of build-to-suits, a significant change for the Chicago area, Bisnow reported, citing the Colliers study.

“In 2019, developers finished 23.1 million sq. ft., including 15.1 million sq. ft. of speculative product, a record amount of spec since the current development cycle began in 2013. And in 2020, 12.3 million sq. ft. of the more than 23 million sq. ft.completed was for spec projects. But of the projects now under construction, only 31% of the space is speculative,” Bisnow reported.

The activity can be explained by the COVID-19 crisis, as consumers sought ways to avoid crowded retail stores.

“We’re seeing companies re-engineer their supply chain, and a lot of that is due to the greater use of online shopping, particularly groceries,” Colliers International principal David Bercu told Bisnow.

“In the blink of an eye, there were several large transactions completed, and now Chicago is tight when it comes to big-box space,” he was quoted as saying.

Developers started a total of 65 new projects of all sizes in 2020, totaling more than 35 million sq. ft. This represented a 76% increase over 2019 — largely because developers constructed larger structures, driven especially by demands from Amazon.

According to the report, Seefried Industrial Properties delivered in the fourth quarter a build-to-suit project of more than 1 million sq. ft. for Amazon in Beloit, Wisconsin.

Meanwhile, Venture One Real Estate constructed another project for Amazon in Channahon’s Crossroads 55 business park. Work  also continues on two five-story build-to-suit facilities for Amazon in south suburban Markham and Matteson. (See report from broadcaster WGN-9 below)

“Each building will total 3.8M sq. ft., the largest modern industrial buildings ever developed in the Chicago region,” the published report says.

“One of the few positive things that came out of COVID was the resurgence of the industrial market, particularly in Chicago, and Amazon is at the forefront of it,” Bercu said.

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