Chicago Industrial Vacancy Creeps Up As New Product Hits Market
Chicago’s tighter-than-tight big-box industrial vacancy rate ticked up for the second quarter in a row, as long-awaited new deliveries came online, giving the market a bit of breathing room.
Vacancy climbed 65 basis points to 3.57% in the third quarter, per a new Colliers report provided to Bisnow, after bottoming out at a record-low 2.61% in the first quarter. The report pointed to surging demand in the wake of the pandemic that led to a sharp increase in completed speculative projects over the past six months.
“Unprecedented demand for modern big box space has resulted in a big push for new speculative product and a climbing vacancy rate despite strong leasing activity,” Colliers Vice President for Chicago-Rosemont Craig Hurvitz said in the report, which tallied 14 buildings totaling 7.1M SF completed during the quarter.
The largest big-box industrial leases for the quarter came from Uline, which pre-leased over 1M SF in Bristol, Wisconsin; Home Depot, which inked a new lease for 990K SF in Joliet; and RJW Logistics Group, with an 815K SF lease in Romeoville.
The report notes that while vacancy increased for the quarter, it is still well below the 5.83% rate recorded a year ago. Colliers expects vacancy to nudge up further in the new year amid a record amount of speculative construction expected to come online.
In the third quarter, developers started construction on 31 big-box buildings totaling 15.5M SF. All told, per Colliers, 63 buildings and about 31.5M SF are under construction across the Chicago metro.
“The supply side is starting to catch up,” Colliers broker Matthew Stauber told the Real Deal of the increase in new industrial construction that began in late summer. “Instead of having five bidders for every space, now it’s down to two or three.”