O'Hare Demand Still Robust As Firms Occupy Second-Generation Spaces
Demand for logistics space in the dense market around O’Hare Airport continues to be robust, and even though new options are opening up, some growing distribution firms are willing to lease up second-generation space.
ODW Logistics Inc. became the latest to do so by signing a lease expansion that was one of the largest deals completed near the airport in 2018. It will occupy 5300 Proviso Drive, a 343K SF building constructed in Melrose Park in 1982. It had signed a lease for between 200K and 250K SF in 2017, according to data from CompStak. The new lease starts in September 2020.
“Tenants are looking at new construction alternatives, but they are deterred by the premium placed on rental rates from high construction costs,” said Transwestern Senior Vice President John Joyce, who negotiated the lease for ownership. JLL's Dan McGillicuddy represented ODW.
Transwestern Investment Group purchased the property in 2016 for $14.7M, according to Cook County property records.
The O'Hare submarket’s vacancy rate hit another record low in the third quarter, sinking to only 3.02%, according to Colliers International. That is the lowest of any submarket in the Chicago region.
But for companies willing to pay higher rates, other options are opening up.
Developers completed 637K SF of spec space around O'Hare in the third quarter and an additional 926K SF in the fourth, according to an interactive aerial map created by Colliers. Of that nearly 1.6M SF, about 1.38M SF was still available. The company expects developers to launch additional spec projects in the spring.
That most likely means that low vacancy rate will finally start to rise.
“Despite this development, demand is projected to remain strong, and much of this new space coming to market will quickly be leased,” Colliers said.