Chicago had just 2M SF in industrial construction starts in the first quarter, its lowest quarterly total since Q1 2019, according to a new report from Colliers.

The new construction slump represents a cooldown from Chicago’s red-hot pandemic-era industrial boom when developers raced to build a host of properties to keep up with skyrocketing demand. Last year alone, developers delivered 33M SF of speculative product, only 29% of which was leased at the end of Q1.

A sizable chunk of recently constructed buildings is vacant, and developers are waiting for occupancy numbers to rise before they begin more new construction, said Diana Perez, research director at Colliers. She expects tenants to lease a good amount of the recently delivered space within the next 18 months.

“All this space is going to be absorbed within the next year, year and a half,” Perez said. “This will result in developers feeling confident and starting construction. It will generate more demand for new space.”

The largest construction start this quarter came when Crow Holdings broke ground on a 1.2M SF build-to-suit facility for GE in Morris, according to Colliers. That runs counter to a trend toward weakening demand for big-box spaces compared to the peak of the industrial boom, Perez said.

Combining speculative and build-to-suit projects, developers delivered 6.6M SF over the first quarter, down 47% from the 12.4M SF of completions in the fourth quarter. Q1 marked the third-lowest quarterly delivery total in Chicago’s industrial market since 2022.

Brookfield made the two largest industrial purchases of the quarter in the Chicago area, buying a three-property, 1.3M SF portfolio across Bolingbrook and Romeoville for $98.8M and a 164K SF property in the O’Hare submarket for $83.5M, according to a Savills report. DWS Group sold both of the assets.

Haribo signed the largest new lease, inking a deal for 447K SF at 9403 136th Ave. in Kenosha, according to Savills. LaserShip followed closely with its new lease for 335K SF at 565 S. Pinnacle Drive in Romeoville.

Distribution centers are still a main driver for space usage, though manufacturing and warehouses contribute as well, Perez said.

“We’re still a healthy market,” Perez said. “It was three years of craziness … but I think now that everything is pretty much back to normal, we’ll be back to pre-pandemic levels, which is still a healthy market.”