The Chicago area industrial market has hit its lowest availability rate in 19 years.
According to CBRE’s Q3 industrial market stats, the Chicago market recorded more than 4.3 million square feet of positive absorption, bringing the year-to-date total to 15.5 million square feet. Currently, the availability rate in the Chicago market sits at a tight 6.6 percent.
This continues a long-term trend in the market, as the latest report marks the 21st consecutive quarter of positive net absorption. In the last five years, the Chicago market, which includes northwest Indiana and Kenosha and Racine in southwest Wisconsin, has absorbed 90 million square feet.
“We have seen activity across the board, from Fortune 500 companies and E-commerce providers to third party logistic firms and food users—it has been a very positive market,” said Zach Graham, First Vice President with CBRE. “These companies have addressed their growth and supply chain constraints through consolidations, expansions, and relocations to modern highly-functional facilities. The supply chain trend of speed to consumer door by locating in or near to major population centers has also supported the trend.”
With this amount of absorption taking place and the declining availability rate, new construction has begun at a swift pace throughout the area as developers have reacted to the increased demand.
- In the 3Q alone, 10 million square feet of new construction starts were initiated.
- More than 5.4 msf of this activity was speculative development
- In total, the Chicago area has 20.5 msf under construction.
“As reflected by the absorption statistics, supply is yet to outpace demand in Chicago’s industrial market,” said Graham. “ Several of the submarkets are still showing demand for new product, and I expect we will continue to see extensive developer activity and new construction over the next 12-18 months. The new construction should continue to push rental rate growth as long as absorption remains healthy, and the market remains in balance as opposed to being over-built.”