With nearly $30B in mega deals in recent months, Chicago's industrial market is off the charts. But what factors are driving demand, and could 2016 bring a downturn? According to the panel of experts at Bisnow's 5th Annual Industrial Summit on May 8 at the Hyatt Regency O'Hare, here are five stories you should be watching to find out.
1. Mega Deals
Among our panelists, Brennan Investment Group chairman Michael Brennan says investor interest across the industrial market is high, and that's been reflected in a number of mega deals completed in recent months, from Prologis's purchase of KTR's $5.9B portfolio (which includes some holdings in Chicago) to Blackstone's $23B acquisition of GE Capital Real Estate's assets (with 17 Chicagoland buildings) this year, and Blackstone's purchase of GE's warehouse portfolio in 2014. More big deals are likely to come in 2016, says Michael. The competition to own portfolios of Class-A buildings extends to the Chicago area too.
2. Record High Positive Absorption
Also among our panelists, NGKF executive managing director Geoffrey Kasselman (pictured) notes that Chicago has seen five years of positive absorption. "We don't see that abating any time soon," he says. "It's been really remarkable." And that'll continue to inspire investors and drive some of those big deals we've been seeing.
3. Game-Changing Technology
JLL SVP Steve Trapp, also a panelist, says demand from retailers and distribution partners will continue to be driven by location and flexible leasing options. Michael thinks the increased mechanization and automation of processes available in the US is giving our industrial market a competitive edge over China.
4. Interest Rates
Geoffrey says higher interest rates are inevitable. "They can really only go up." He thinks the catalyst could be minimum wage increases in the state and elsewhere. If interest rates go up in 2016, to what extent will it lead to a market cooldown?
5. The Unknown
Changes to the supply chain can affect how goods are moved, the strategy behind where companies want to lease warehouses and place truck routes, and prices across the market. Geoffrey predicts the Panama Canal's reopening in 2016 (pictured) will have a dramatic, unknown effect on all of these factors, especially for Chicago, with its role as a major inland port city. To learn more, please join us for Bisnow's 5th Annual Industrial Summit on May 8 at the Hyatt Regency O'Hare, starting at 7 am. Sign up here!
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