Chicago’s industrial market is regaining positive momentum, posting its best quarter for new leasing in more than two years.

Tenants signed 10.7M SF of new leases in the second quarter, the highest quarterly total since the first quarter of 2023, according to Colliers' Q2 industrial report. New leasing activity was up 43.5% from the prior quarter's total of 7.4M SF.

“I think people are feeling more comfortable with how the economy is looking right now,” said Diana Perez, director of industrial research at Colliers. “Chicago is very steady now compared to other quarters.”

The vacancy rate for Chicago industrial dipped by 12 basis points as a result of the uptick in activity, down to 4.67%.

RJW Logistics Group signed the largest lease in the quarter, a 1.1M SF commitment at 201 W. Compass Blvd. in Joliet. Ikea subleased 990K SF in the same Chicago suburb in Q2. Colliers expects that submarket to see a continued decline in vacancy rate over the next six months, driven by sustained strong tenant demand.

The demand hasn’t yet filled the swath of speculative builds delivered in 2023 and 2024. Many developers are holding off on breaking ground as they wait for absorption to catch up, leading the pace of new industrial construction to fall dramatically compared to historical highs in the past few years.

Some of the speculative construction built in previous years is starting to get absorbed, Perez said. Tenants looking for large spaces have a dwindling number of options, as most of the new speculative construction has been smaller buildings.

Just one speculative project over 1M SF is under construction, a 1.2M SF build from DHL in Plainfield, according to Colliers, which Perez said is set to deliver in the second quarter. Northern Builders and Trammell Crow Co. also have speculative projects in the works totaling 802K SF and 788K SF, respectively.

At the end of June, the development pipeline consisted of 33 buildings totaling 9.3M SF, an 11% decline from last quarter and the fourth consecutive quarterly decline. The pipeline is at its lowest level of active construction since the second quarter of 2018.

“Construction is not going to pick up anytime soon,” Perez said. “When I follow up with developers on when they think they’ll start, they keep pushing it to the next quarter and the next quarter.”

Part of the delay has to do with the tough financing environment for new construction. Another component is the sheer amount of newly built space still available.

Of the 33.1M SF of industrial space delivered in Chicago in 2023, 61% had been leased through June 2025, Perez said. Just 32% of the industrial properties that came online in 2024 have found tenants, she said. The vacancy rate on recent spec development is more than 15.2%, which accounts for most of the market’s overall vacancy.

“There’s no reason why we should build new buildings when there's new buildings still available,” Perez said.