Chicago Industrial Is Having A Moment — Some Investors Want In

Chicago-area industrial is boring — and that’s a good thing. 

Far from putting prospective investors to sleep, the sector’s steady fundamentals are luring midmarket buyers who are chasing attractive returns to the center of the country.

A diverse pool of tenants and building types, coupled with a lack of overbuilding during the sector’s pandemic-induced highs, has put the region in a position to capitalize on a fresh wave of capital.

“Chicago and just the bigger Midwest is just having a little bit of a moment right now,” said Tina Ramos, principal and co-founder of Matterhorn Venture Partners. “The fundamentals are very strong.”

Matterhorn announced a joint venture with TPG Angelo Gordon U.S. Real Estate in early February to compile value-add industrial assets in the Chicago area and the nearby Midwest throughout the next four years. The partnership has a $300M equity commitment, which equates to total buying power of more than $900M. 

Matterhorn will use that money to capitalize on the area’s stable leasing trends and rising rent growth as it builds up a portfolio intended for sale to an institutional investor down the line.

Scott McKibben, CEO and co-founder of Matterhorn, said investors who take the plunge in Chicago industrial now will reap the rewards in a few years. He said he thinks rents will likely be higher than historical growth rates and there will potentially be some compression or flattening of cap rates.

“If you are buying now, you're going to be very thankful you did it two, three years from now,” McKibben said. 

The Chicago industrial vacancy rate finished 2025 at about 4.6%, barely moving from the 4.7% at the end of 2024 but significantly below the roughly 5.2% rate at the close of 2023, Colliers Research Director Diana Perez said. 

The market recorded 40.5M SF of leasing activity in 2025, including 12.5M SF in the fourth quarter. That is significantly higher than 2024’s 30.4M SF, and the uptick in volume has continued in the early stages of 2026, Perez said. 

“There’s movement,” she said. “It’s not really high peaks or really low lows. It’s the steadiness that people are seeing.” 

Most of the increase in leasing activity compared to 2024 was in buildings in the 100K SF to 200K SF range, while other size segments have either increased slightly or stayed the same, Perez said. Year-over-year, the starting net lease rate, based on lease comps Colliers receives, rose 4.6%, from $8.58 to $8.97 per SF.

With a diverse mix of product types in the Chicago industrial market, tenants have had to decide between competing factors when signing leases, said Caitlin Sullivan, senior vice president and market officer at Link Logistics. Smaller companies and manufacturers are often more amenable to taking over older space, she said. 

“You kind of have the three legs of the triangle. You can get either location, price or functionality,” Sullivan said. “And more often than not, you have to pick two of the three.”

Sullivan said leases are coming due following the leasing boom during the pandemic, so there is a lot of opportunity in the market as tenants make new leasing decisions after “that time of heated decision-making.” 

Even during that period, Chicago didn’t explode in the way some other metros did, which has made it more durable years later, Sullivan said. 

“We didn't quite make headlines during the height of the industrial velocity during Covid, but that kind of felt good, like we are stable,” Sullivan said. “That's what's drawing attention to us again from investors, from users, is there is that stability.”

There is a pair of companies banking on a rare window of opportunity in the broader Midwest to compile a portfolio of industrial assets that they will be able to sell to bigger players in a few years: Matterhorn and Houston-based SparrowHawk. 

SparrowHawk received a commitment of up to $300M in growth capital from Almanac Realty Investors in early January to acquire industrial assets throughout the Midwest. SparrowHawk has 16 properties across the St. Louis, Kansas City and Chicago markets, and it is looking to expand in those cities and in Indianapolis, Louisville, Kentucky, Cincinnati and Columbus, Ohio. 

Alfredo Gutierrez, the president and founder of SparrowHawk, said he is a longtime believer in the Midwest, as it logistically sits perfectly within the country, especially given the continued growth of e-commerce. 

“I'm showing love for all the Midwest markets right now,” Gutierrez said. “We're looking at all of them.”

When compiling a portfolio for later sale to an institutional investor, Gutierrez said you need to be careful about overindexing and buying up too much supply in a particular market. 

“The problem is, when you get too large, now if you put it all together, you're basically making somebody the king of the city, and they may not want to be,” Gutierrez said. 

Ramos said Matterhorn is “hyperfocused” on location and screens its value-add deals with an eye toward liquidity when they are sold. Assets are generally most liquid in DuPage, Will and Lake counties, with Cook County not seeing quite as much traction, she said.

While Matterhorn will buy assets in Cook County and likes the labor pool there, the liquidity at exit is tougher, Ramos said. The bid list on a portfolio in DuPage County is deeper than in Cook County, because some investors just won’t consider Cook County properties. 

“We're very bullish on Chicago, and we're also hyperfocused on buying product that an institutional investor will want to buy from us on an exit,” Ramos said.

Gutierrez estimated the ideal time frame for investment opportunities would last about 12 to 18 months, after which there would once again be “a little bit of a frenzy.” He said he thinks this environment provides an advantage because larger institutions aren't diving in too heavily, so there is a fair footing to compete against them. 

When the window closes, there will still be deals to be had for smaller investors, just not with the wide selection they have now, he said. 

“You'll see cap rates compressed again,” Gutierrez said. “And it doesn't mean you can't, won't find deals. We've done it for 30 years. It's just right now, I'm in the buffet line. I'm not ordering off the menu.”