Chicago’s industrial market continued to gain momentum in the first half of 2019, with a record-low vacancy rate, historically strong rental rates and a robust construction pipeline, according to the newly released “Chicago Q2 Industrial Market Snapshot” from Cushman & Wakefield, based on data from CoStar Analytics.
“Coming off a huge year in 2018 for new leasing activity and building completions, we were cautiously optimistic about 2019, which has already exceeded expectations at mid-year,” said David Friedland, executive director and Chicago industrial group leader for the brokerage. “E-commerce, logistics, food and beverage and other industries continue to drive development, sales and leasing activity.”
The local vacancy rate dropped to a record 19-year low of 5.0% in the second quarter, down from 5.5% in the first quarter and 6.3% a year earlier, according to the broker’s research. Meanwhile, the average asking net rent of $5.44 per square foot, while down slightly from the first quarter, remained above 2017 and 2018 levels. Net absorption totaled 2.8 million square feet (MSF) in the second quarter, the 34th consecutive quarter this key indicator of demand has remained positive.
New industrial developments continue to break ground in 2019, with over 7.5 MSF delivered through the second quarter, up 36.2% year-over-year. Much of the completed inventory was built on a speculative basis, with a current vacancy rate of 79.4%. Cushman & Wakefield projects new supply to total 19.8 MSF for all of 2019, above the 11.6 MSF completed in 2018.
“The seemingly insatiable demand for industrial space is being driven in large part by the broader shift in supply chains, with a growing focus on last-mile logistics, particularly in centrally located population centers like Chicago,” said Friedland. “Several large transactions are expected to close here over the next two quarters, which will help propel the market into 2020. Despite all the activity, a lot of capital remains on the sidelines – some of it trading in from other sectors – that may lead investors to pursue more opportunistic deals in the coming months.”
Chicago-area leasing activity totaled 13.6 MSF in the second quarter, with the I-55 Corridor, Southern Fox Valley and Southeast Wisconsin submarkets accounting for nearly 43% of the transactions. Contributing to the second-quarter total were a number of deals brokered by Cushman & Wakefield, including:
Industrial coworking space provider CubeWork executed a long-term, 202,259-sq. ft. lease at 7080 N. McCormick Blvd. in Lincolnwood. This was one of the largest transactions to be completed in the Edens Corridor in the past 10 years.
TD Commodities executed a long-term, 694,367-sq. ft. lease renewal at 1000 Bitter Road in Aurora.