No End In Sight For Big-Box Industrial's Record-Setting Leasing
The first half of 2021 saw accelerating demand for logistics space in the Chicago region's biggest and most modern industrial buildings. Tenants absorbed a record amount in Q1, then nearly set another quarterly absorption record in Q2, according to Colliers International.
All the activity resulted in a net absorption total of 15.3M SF at big-box buildings through the first six months of 2021, Colliers found. That eclipses the 15.1M SF absorbed throughout all of 2020, and, at 8.6M SF, tenants set a quarterly record for new leasing activity in Q2. With only three big-box buildings completed during the first half of the year, the vacancy rate dropped 185 basis points to 6.3%, one of the lowest rates ever for big-box buildings.
"Eleven submarkets witnessed vacancy rates decrease, two to all-time low levels, while the vacancy rate increased in only one submarket," Colliers reported.
The company defines big-box buildings as precast structures of 200K SF or more, with ceiling heights of 28 feet or higher. The region's big-box sector consists of 667 facilities with a total of 298M SF.
Amazon has been one of the region's big players, and Q2 was no exception. The company leased two big-box buildings totaling more than 1.1M SF, according to Colliers.
But the internet giant was hardly the only company taking down big spaces.
Lion Electric Co. completed Q2's largest lease by agreeing to occupy 906K SF at Clarius Partners' 3835 Youngs Road in southwest suburban Joliet. The Quebec-based manufacturer will use the facility to make all-electric medium- and heavy-duty urban vehicles. And Kenco Logistics agreed to Q2's second-largest lease by signing for 849K SF at 501 Internationale Parkway South in southwest suburban Minooka near Joliet.
At 66M SF, the I-80 Joliet Corridor is the region's largest big-box submarket, and the vacancy rate sank from 3.95% in Q1 to 2.73% in Q2, Colliers stated.
Developers completed only three big-box buildings in Q2, Colliers added, and the 1.7M SF total was the lowest amount since Q3 2018. Amazon's 1.1M SF build-to-suit facility in south suburban University Park was the largest building finished in Q2.
But development is not slowing down. Developers started 16 new big-box buildings totaling 8.5M SF, bringing the total amount underway to 19.5M SF in 35 buildings, another new record.
Venture One Real Estate has the largest project underway, a 1.2M SF build-to-suit for Scott's Miracle Gro at 24231 South Exchange Blvd. in southwest suburban Channahon. Duke Realty Corp. has the second-largest big-box building under construction, a 1.2M SF build-to-suit for Wayfair at 1040 West Renwick Road in southwest suburban Romeoville.