With a dose of support from e-commerce, demand for industrial property in the Chicago area shows little sign of letting up as vacancy rates hit a 19-year low, the real estate firm Cushman & Wakefield said in a report.
A need for “last mile” delivery sites has heightened demand for space within Chicago and close-in suburbs, said David Friedland, executive director and Chicago Industrial Group leader for Cushman. “Last mile” refers to sites close to dense population zones where shippers can collect and quickly deliver products. It’s been called the “Amazon effect,” but it really includes any company that responds to online orders.
Friedland said the Chicago market has topped expectations for 2019, even with the year just half over. “E-commerce, logistics, food and beverage and other industries continue to drive development, sales and leasing activity,” he said.
During the second quarter, the industrial vacancy rate fell to 5%, the lowest in 19 years and down from 6.3% a year earlier, according to Cushman data.
The firm reported average asking net rents of $5.44 per square foot, down slightly from the first quarter but up 2.8% from a year ago.
Friedland said activity has been especially strong along the Interstate 55 corridor near Midway Airport, where developers are building “on spec,” or without first signing a tenant to lease the space.
The projects include Exchange 55, a 1 million-square-foot building at 3501 S. Pulaski Road, site of the old Crawford Power Generating Station, and Marina Crossings at 2075 W. 43rd St.
Marina Crossings has leased half of its 633,000 square feet, Friedland said. Cushman is the listing agent for both properties.
“Several large transactions are expected to close here over the next two quarters, which will help propel the market into 2020,” Friedland said.
Cushman projects new construction will total 19.8 million square feet in 2019, compared with 11.6 million square feet in 2018.