While other CRE asset classes, especially office, have struggled, Chicagoland’s industrial market remains lively, continuing to hit record highs in terms of leasing activity.
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Actualized rents for new industrial product have increased 27.8% since 2017 to $6.48 per SF, according to a Cushman & Wakefield report — almost 5% above listed rents — as the metro continues to enjoy some of the most intense industrial demand in the nation. Asking rates have gone up 21.6% during the same time period.
“We’ve got like this perfect storm of everything industrial here,” said Jason West, executive vice chair for Cushman & Wakefield’s Chicago office. “We've got a really solid and diverse industrial base with a lot of manufacturing. We've got distribution and warehousing. We've got e-commerce. We're clicking on all cylinders, and that bodes well for both the industrial users and companies that want to locate here and also the industrial owners.”
New leasing activity has been “off the charts” as well, West said, with 43M SF of new leasing activity in 2022, 54M SF in 2021 and 40M SF in 2020. Prior to the pandemic, the average was around 25M SF per year, West said.
“We had like six quarters of double-digit-million-square-foot leasing, and usually it hovers around like 7M SF or 8M SF, just depending on what time of year it is,” said Gregory Rogalla, research manager at Cushman & Wakefield. “We just had explosive growth since 2020.”
Given an overall economic slowdown, industrial leasing has come down from stratospheric highs, though market indicators suggest 2023 will be an average year for the city's industrial market, or even slightly above.
"Now it's leveling off to a little bit above pre-pandemic averages,” Rogalla said.
Lease rates have notably increased in the Northern Fox Valley submarket, up 59.1%, and in the Southern DuPage submarket, up 45.2%. The O’Hare submarket has seen some of the highest rent increases in Chicagoland, up 23.7%, according to the report.
“We do think it's going to stay relatively hot,” West said. “We've had this wave of activity for the last three years, from 2020 through 2022. The pace that we saw for absorption and new leasing activity was way above our historical averages.”
