Industrial Users Blow Past Another Record, And 2021 May Be The Biggest Year Ever
Eye-popping levels of activity in the industrial sector have become the norm over the past year, and Q1 2021 was no different.
Chicago-area users of the largest Class-A warehouses and distribution absorbed more than 8.2M SF in the first three months of the year, almost as much as seen during all of 2018, according to Colliers International. The firm tracks activity in these big-boxes, precast construction facilities of more than 200K SF and 28-foot clear height ceilings or higher.
Even during the industrial boom of the past few years, in most quarters, users would absorb between 3M SF and 4M SF, and there would be the occasional spike up to around 6M SF, Colliers International principal Matthew Stauber said.
The Chicagoland market doesn't show signs of slowing down.
"We think that this level of demand will continue for at least 12 months," Stauber said.
Developers also set a new record in Q1, Colliers found. Nearly 8M SF of new big-box product was finished, including four buildings of more than 1M SF: three build-to-suits and a 1.1M SF speculative facility from CenterPoint Properties at the Intermodal Center Joliet, which Walmart recently agreed to occupy.
The shutdown of much of the nation's supply chain led many firms to drastically build up their inventory, Stauber said, boosting the demand from many firms for new warehouses. In addition, e-commerce firms need more logistics and distribution space to handle all the pent-up demand from consumers, many of whom have money to spend due to federal stimulus payments.
The largest new lease of Q1 was Wayfair's agreement with Duke Realty, which will build the e-commerce furniture company a 1.2M SF distribution facility on 81 acres in southwest suburban Romeoville. Duke Realty also agreed to construct a 655K SF build-to-suit facility for Home Depot in southwest suburban Bedford Park.
Stauber also said it isn't likely that the current building boom will get ahead of the strong demand and create a supply glut. The soaring costs of construction materials, which just saw the largest spike since 2008, will be one factor that keeps developers from getting too exuberant. Material shortages may play an even bigger role.
"We're working with one client to put up a 500K SF build-to-suit in the Chicago area, and we were told that if we put in the order today, it would take until next May to get the precast panels," he said. "That's a very long lead time, and steel is in the same situation."
The company is having the same experience with a Dallas-based client.
"It's not just in Chicago, it's all across the country," he said.