A record number of third-quarter deliveries in the industrial sector highlights the enduring strength of the asset class in the city, though a lack of big-box lease signings, a glut of new space and slower leasing volume may portend future trouble.

Developers delivered 12.8M SF of industrial space to Chicago in Q3, the highest quarterly volume since 15M SF was delivered in Q1 1999, according to a JLL industrial report. Almost the entirety of the product delivered — 11.9M SF, or 94% of the total volume — was speculative in nature.

JLL Managing Director Dominic Carbonari, a 22-year veteran of industrial CRE in Chicago, said the deliveries are indicative of the strength and health of the industrial sector.

“It's a massive number, to be quite honest with you,” Carbonari said. “And in my career, it's the biggest number.”

The three largest speculative developments delivered were all in Joliet. NorthPoint Development completed two of them, measuring 1.4M SF and 1.1M SF, respectively, while CenterPoint Properties delivered 997K SF at Joliet's CenterPoint Intermodal Center.

But other industrial indicators don’t paint the same rosy picture.

Quarterly leasing activity dropped to 4.7M SF, less than half of Q2's 9.9M SF. JLL Director of Industrial Research George Cutro told Bisnow in an email that the last time leasing activity was below 5M SF was in Q1 2017, when tenants leased 2.8M SF.

No new leases were signed in the big-box segment of the market in Q3, according to JLL, a reversal from the early pandemic days when such spaces were eagerly gobbled up amid an e-commerce boom. Big-box industrial spaces typically run upward of 200K SF and are used for large warehouses or distribution centers.

Cutro said the lack of newly signed big-box leases led to weaker overall demand.

The city’s vacancy rate in Q3 was 3.8%, up 75 basis points from the Q2 rate of 3.05%. One year ago, Chicago’s industrial vacancy rate was 2.84%. Cutro attributed the rise to the volume of new space delivered to the market rather than companies giving up space.

Still, major real estate players are continuing to take bites of Chicago’s industrial apple. In late September, investment giant Blackstone purchased four industrial properties near O’Hare International Airport from CenterPoint Properties for nearly $137M, The Real Deal reported.

“Demand isn't what it was two or three quarters ago, but it's still very healthy and very strong,” Carbonari said. “There's still activity. Manufacturing companies are still looking to occupy the big-box buildings. I think we could use a little more supply. But I think only time will tell on that when it comes to the big-box stuff.”

CORRECTION, OCT. 26, 10:15 A.M. CT: This story has been updated to correct the misspelling of a name.