Unprecedented Demand Fuels Record-Breaking Year For Chicago Big-Box Industrial
Industrial users of the Chicago region’s biggest and most modern buildings just blew past the previous quarterly record for absorption, according to a Q3 report from Colliers International. This record-setting pace has gone on throughout the year, with users of big-box properties already setting a new annual record for absorption, even though one quarter remains.
Companies such as Amazon, Unis, Walmart and many logistics firms have scrambled throughout 2021 to lease the space needed to handle accelerating consumer demand. That competition pushed the big-box vacancy rate below the overall industrial rate for the first time since these numbers were tracked, Colliers found. It has also changed the fortunes of industrial developers, who until recently could sometimes wait years to fill up new buildings.
“Pre-leases of speculative buildings that are under construction are becoming increasingly common in Chicago’s industrial market, and were practically unheard of only a few years ago,” Colliers reported.
Year-to-date net absorption hit 23.9M SF by the end of Q3, Colliers added. That is 37% greater than any previous annual total.
The vacancy rate for these big boxes, which Colliers defines as precast structures of 200K SF or more, with ceiling heights of 28 feet or higher, were on a steady decline for several years before the coronavirus pandemic but began an even steeper drop at the start of 2021. One year ago, the vacancy rate stood at 8.77%. It has fallen nearly 300 basis points since then to 5.83%, one of the lowest rates recorded.
The sharp drops in vacancy have been a bit surprising considering developers are launching and completing new projects at a rapid clip, according to Colliers. A total of 13 big-box developments were finished in Q3, adding more than 7.7M SF to the region’s inventory — the second-greatest total recorded, bested only by the 7.8M SF completed in Q1 2021. The region's big-box sector now consists of 680 facilities with a total of 306M SF.
Completed projects include Conor Commercial Real Estate’s Brewster Creek Commerce Center, a 436K SF speculative industrial development at 235 Spitzer Road in northwest suburban Bartlett, which Chicago-based Colony Display also agreed to lease. And Amazon continued to play an outsized role. After leasing several big-box buildings totaling 1.1M SF in Q2, the internet giant signed Q3’s largest build-to-suit lease, a deal for 1.1M SF in northwest suburban Huntley. In addition, Unis took 573K SF at 775 Veterans Parkway in southwest suburban Bolingbrook.
Construction crews aren't slowing down. Developers launched another 13 big-box projects during Q3, which will together add an additional 7.7M SF. The total amount under construction has held steady throughout the year at around 19.5M SF.
Duke Realty Corp. has the largest big-box building under construction, a 1.2M SF build-to-suit for Wayfair at 1040 West Renwick Road in southwest suburban Romeoville. And Northern Builders has the largest spec project underway, a 1.1M SF building at 2250 Berens Court in New Lenox, just east of Joliet.