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Some Product Distributors Are Recession-Proof And Hungry For Space In Chicago

HVAC equipment distributor Johnstone Supply signed a full-building lease with developer Dayton Street Partners for its newly constructed distribution center at 4150 North Knox Ave. on Chicago’s North Side, and Dayton officials say it’s a sign that although the economic downturn soured the outlook for portions of the industrial market, some occupiers continue doing brisk business.

“The HVAC companies are somewhat recession-proof, especially with summer coming, and with so many more home improvement projects going on now,” Dayton Street Managing Principal Howard Wedren said. “People are sitting within the four walls of their homes all day and looking for projects to do.”

4150 North Knox Ave.

The developer completed construction on the 41K SF center in late 2017, and Wedren said filling it up helps show small, modern distribution centers are needed throughout dense population centers. Portland-based Johnstone has multiple locations throughout Illinois.

“It reflects the overall demand from companies serving the city to be as close to their customers as they can. They can’t drive out to Bolingbrook or O’Hare; they need to have their products close by.”   

But developing on Chicago’s North Side is not easy. According to Colliers International, the submarket, which in Q1 had a vacancy rate of 5.49%, doesn’t have any new buildings under construction, and none were completed in 2019. 

“This is very much an infill location,” Wedren said. “There is zero availability in terms of land.”

New industrial construction in the city of Chicago.

On the more open South Side, which had a vacancy rate of 8.61%, industrial developers had about 1.4M SF under construction in Q1, Colliers found, and occupiers are also showing up to fill new buildings.

The Method soap division of S.C. Johnson & Co. leased the entire 399K SF building in Pullman on 106th Avenue delivered by Ryan Cos. in the first quarter, Colliers said, and the company forecasts more of the same in 2020.

“Despite economic uncertainty, developer and user demand is expected to remain strong in the city of Chicago, as distributors and retailers look to serve the large population of the city and the nearby suburbs,” according to Colliers. “Additional redevelopment sales occurred during the first quarter of 2020, which will eventually lead to new industrial development projects.”