A Shifting Market: Trends in Chicagoland Industrial Real Estate

Back to normal or a complete shift in an over built market? Industrial occupiers around Chicagoland see what seems like an overnight shift in market dynamics.

The pandemic boom of industrial development around Chicagoland was unprecedented. Between 2021 and 2023, over 93 million square feet of new product was delivered: more than 20 million square feet more than any other 3-year period on record.

While this boom was spurred by an ecommerce surge resulting in record leasing activity in 2021 (81 million square feet), 2023 experienced a slowdown in volume to 52 million square feet. This figure is slightly lower than the 10-year pre-pandemic average, leading many firms to believe that this is a return to a more normal market. However, the landscape for occupiers in the market is vastly changed. The new buildings that were delivered throughout the past three years were underwritten as construction costs ballooned and interest rates began ticking up. The result is newly constructed buildings that are listing asking rents at all time highs for all size ranges. These rents have pushed users away from moving to new facilities as evidenced by the vacancy rate for buildings built after 2021 sitting at 27.9% - a staggering number when one considers that the overall vacancy for the entire Chicagoland industrial market is 5.0%.

While this may be good news for existing landlords expecting to easily retain tenants, there are softer, less utilized markets that are able to be leveraged to ensure honest negotiations. Northwest Indiana, the I-39 Corridor, and buildings with any sort of TIF or tax mitigation incentives in place have provided economic alternatives that have the potential to lure tenants away from existing landlords without paying a premium for new space.

Users looking for new space should expect their real estate provider to evaluate all viable markets and negotiate for the best possible terms rather than simply facilitating a transaction in what is perceived as a tight, Landlord market.