Industrial Construction Doubles Over The Past Year
As they waited for tenants to absorb the historic amount of speculative space hitting the market, industrial developers slowed down new construction in 2017 and much of 2018, but steady leasing activity has led many to start putting shovels in the ground again.
Developers now have 54 projects totaling 16.9M SF underway, more than double the 7.2M SF under construction one year ago, according to a new report from Colliers International. And 36 of these buildings, comprising 69% of the total space, are being done on a speculative basis, with no tenants lined up.
That is a higher percentage than in 2017, when roughly half of construction deliveries were speculative, but user demand remains strong, especially for new logistics space that helps complete same-day deliveries. Since the start of the current development cycle in 2013, developers finished 214 spec projects totaling 56.8M SF, and tenants leased 67% of that space.
“This figure has increased each of the past seven quarters, indicating that demand for new speculative warehouse space is outpacing new supply and the market is not being overbuilt,” Colliers said.
Developers will finish most of the spec space underway between now and September, adding about 12M SF of product to the market, according to the report. And although poor weather conditions slowed new construction in the first quarter, another 8M SF is expected to get started in the second and third quarters of 2019.
The Interstate 55 Corridor has seen 14.6M SF of spec development since 2013, the most of any submarket, and tenants leased 70% of that space, according to Colliers.
Some submarkets have languished. Developers completed 13.1M SF in the Interstate 80 Joliet Corridor since 2013, the second most of any submarket, but tenants leased just 47% of the space, Colliers found. The area contains a lot of big-boxes that companies use to distribute products nationally, and with so much focus on infill markets and smaller, last-mile distribution buildings, it may take a while for tenants to absorb the new space.
A partnership between Levy Family Partners, Development Resources Inc. and Sterling Bay launched the first quarter’s largest construction project. The group began a 503K SF spec facility along I-88 in Aurora.
LFI Real Estate continued construction on an 879K SF spec facility in Monee's Bailly Ridge Corporate Center, the largest building under construction in the metro area.
Learn more about the dominant industrial sector at Bisnow’s Midwest Industrial & Logistics Summit, an all-day conference June 4 in Chicago.