After A Year Of Caution, Speculative Industrial Development Now Proceeding In A Big Way
An industrial construction boom has been in swing throughout the Chicago region ever since the coronavirus hit, but developers frequently stuck to safe build-to-suits, especially when it came to behemoths of more than 1M SF, rather than launch speculative developments.
That may be changing. CenterPoint Properties broke ground on a pair of 1M SF warehouses at 3301 and 4300 North Brandon Road in Joliet and Elwood in its southwest suburban CenterPoint Intermodal Center, even before securing any tenants. It’s a signal that developers are getting even more confident in the market’s long-term potential.
"Building 1M SF facilities on a speculative basis at the same time is a big statement on where we think the market and tenant demand is currently and will remain going forward," Brian McKiernan, CenterPoint senior vice president of development, said in a statement.
A successful year of leasing at the intermodal center was a big factor pushing CenterPoint to take on the risk of so much speculative space, McKiernan added. The company leased 3.5M SF of warehouse space in CIC–Joliet/Elwood over the past year.
Before Covid-19 hit, the region’s landscape was dotted with 1M SF warehouses that had sat vacant for long stretches. Many filled up during 2020 and the first few months of this year, and that boosted builders’ confidence, especially in the I-80 submarket around Joliet and Elwood, which typically has the most big-box properties.
“Recent concerns of overbuilding and high vacancy rates [in I-80] have been tempered over the past two years as significant leasing activity has resulted in a vacancy rate plummeting to one of the lowest rates the area has ever recorded,” according to a Colliers report.
But new spec buildings of more than 1M SF were still rare.
CenterPoint’s 3501 Brandon Road was one of four warehouses of more than 1M SF completed in Q1 2021, but the other three were build-to-suits, according to Colliers. And among the active construction projects, six buildings of more than 1M SF were underway, but none were speculative.
The largest spec building still underway in Q1 was Clarius Partners’ 906K SF project at 3835 Youngs Road in Joliet, which Canadian manufacturer Lion Electric Co. agreed in May to occupy. All other spec buildings under construction in the Chicago area were 500K SF or less.