Big Box Report Q1 2022DanSmo
To keep pace with market demand new construction remains robust. Approximately 20.0 million SF of new space materialized over the past year, with another 30.8 million SF of industrial space currently under construction in Chicago. Over half of current under-construction space is developed on speculation, including four projects that exceed 1 million SF. With demand growth steadily outpacing new supply, vacancy within Chicago’s industrial market declined by -1.5% over the past 12 months to post the lowest vacancy rate in over two decades at 4.8%.
Buoyed by record levels of new demand and tight fundamentals, average industrial market rents are still rapidly rising in Chicago. Industrial rents increased by 8.6% over the past year.
Out of all the industrial sectors, Chicago’s logistics segment saw the most growth with 37.7 million SF absorbed over the past year, leading to its vacancy rate to compress by -1.5% over the past year to just 4.3% — its lowest level in over 15 years.
Looking forward, tight fundamentals and strong demand should continue to push industrial rents higher in Chicago, with CoStar’s baseline forecast currently calling for average industrial rents to grow by nearly 13% between now and the end of 2023.
Industrial construction activity continues to hover near all-time highs in Chicago at approximately 30.8 million SF. Given the robust construction pipeline, deliveries are expected to continue at an elevated pace through at least 2022
and consistent with national trends, the vast majority of both under-construction and recently delivered space is in the logistics segment. In fact, nearly all of the 20.0 million SF of space that has delivered in Chicago over the past year was in the logistics segment. Well-located speculative larger boxes continue to lease-up quickly, which has kept logistics fundamentals tight despite the current supply wave and elicited further speculative development, with just over half of under construction industrial space in Chicago available for lease.
The most active submarket for construction activity in the Chicago region continues to be the Joliet submarket, which is located along the southwestern edge of the MSA. The Joliet Submarket is advantaged by its unparalleled connectivity with access to multiple major interstates and intermodal terminals, which make the area attractive to larger tenants seeking both local and regional distribution hubs. Approximately 5.9 million SF of industrial space is currently under construction in the Joliet submarket.
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