Local warehouses fill up amid strong economy, e-commerce boom
Date: Wednesday, February 20, 2019
Source: Crain's Chicago Business
With its lowest vacancy rate in nearly 18 years, the warehouse market is arguably the strongest real estate sector in the Chicago area.
The vacancy rate for local industrial property declined to 6.34 percent in the fourth quarter, its lowest level in nearly 18 years, according to a report from Colliers International. The rate fell from 6.40 percent in the third quarter and 6.80 percent a year earlier.
Warehouses, those big windowless boxes along the highway, may not have the cachet of an office tower or luxury hotel, but the sector is an important economic bellwether, rising and falling with the production and shipment of goods. Industrial is arguably the strongest property type in the Chicago area, driven by the strong economy and the rise of e-commerce, as retailers and logistics firms add space to adapt to the Amazon era.
“Leasing and sales are very solid,” said Colliers Principal David Bercu. “There are certain submarkets that are very tight and landlords are able to push rents.”
If there’s one area where supply could be a problem it’s along Interstate 80 from New Lenox west. Developers there have been building huge warehouses, some exceeding more than 600,000 square feet, and several are sitting empty. As a result, the vacancy rate for the I-80 submarket jumped to 11.6 percent in the fourth quarter, up from 7.88 percent a year earlier, according to Colliers.
“There is some concern about the lack of large deals, particularly when you compare Chicago to its peer cities,” Bercu said. “The market is still strong, but it would be unbelievable if we could knock off some of these big bombers . . . We’d like to see some more activity down there relative to the amount of supply that’s been constructed.”