Q2 2012 Chicago, Illinois Industrial Submarket Trends

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Q2 2012 Chicago, Illinois Industrial Submarket Trends

Most of Chicago’s industrial space is located south and west of the city, as Lake Michigan limits the main east-west highways and rail lines to that area. The south side of the City of Chicago was the metro area’s original industrial center, and much of the recent warehouse/distribution development has occurred farther out to the south and southwest of there. While Flex/R&D space can be found throughout the metro area, it is concentrated most heavily in the closer-in suburban west, chiefly in the DuPage County, O’Hare, and North O’Hare submarkets.

Southwest: South Will County

  • For 31.2 million square feet of warehouse/distribution space in South Will County, Reis reports a second quarter 2012 vacancy rate of 21.2%, highest among the 13 submarkets, and an average asking rent of $3.99 psf.
  • Net absorption remained strong here at 410,000 square feet, bringing the year-to-date total to 1.2 million. The vacancy rate is down 130 basis points from the prior quarter and 220 from a year earlier.
  • The average asking rent increased 0.8%, with the average effective rent up 1.5% to $3.41 psf during the quarter, but the asking average is unchanged and the effective average up just 0.6% from a year earlier.
  • The Flex/R&D inventory is limited in this submarket, with a 33.4% vacancy rate that is the second highest metrowide. The average asking rent is $8.17 psf.
  • For 98 million square feet of industrial space in its I-57 submarket, Jones Lang LaSalle reports a vacancy rate of 12.3% and an average asking rent of $3.94 psf.

Southwest/I-55 N.-Will County

  • The I-55 N./Will County submarket plays host to 42.9 million square feet of warehouse-distribution space. Reis reports a vacancy rate of 18.6%, third highest among the submarkets and an average asking rent of $3.92 psf there for the second quarter of 2012.
  • The vacancy rate fell 50 basis points in the second quarter on 204,000 square feet of net absorption and no new supply. The year-over-year decrease is 240 basis points. The average asking rent rose 1.3% and the average effective rent increased 2.1% to $3.40 psf during the quarter. The year-over-year gains are strong at 3.2% and 6.6%, respectively.
  • Reis predicts 5.4 million square feet of new space will be added here from 2012 to 2016, or about a quarter of the metrowide total. There is 307,500 square feet under construction at Union Pointe Business Park in Woodridge, according to Reis.
  • “DCT Industrial Trust commenced construction on a 604,100-square-foot speculative warehouse/distribution facility at DCT 55 Park in Romeoville,” according to Colliers. “The building is scheduled for completion by the end of 2012. This speculative development project is the first that this market has experienced since 2009. Additionally, Edward Don Company (362,500 square feet) and FedEx Ground (239,000 square feet) have build-to-suit projects underway, which bring a total of 105 acres under development in the I-55 Corridor.”
  • Activity was extensive in this submarket in the second quarter according to market watchers. “A major home improvement retailer engaged CenterPoint Properties to build a 1.6-million-square-foot bulk warehouse distribution facility at CenterPoint Intermodal Center in Joliet,” according to Colliers. Others indicate the retailer is Home Depot, from whom a 655,000-square-foot facility completed construction in Elwood, in the South Will County submarket, during the second quarter.
  • “Additionally, Kimberly-Clark Corporation signed a lease for 716,300 square feet at the Windham Lakes Southwest park in Romeoville,” Colliers reported.
  • Jones Lang LaSalle reports leases of 346,000 square feet by Chep Pallet at 710 Theodore Court in Romeoville and 325,000 square feet by New Breed Logistics at 800 Veteran’s Parkway in Bolingbrook. This source reports three large Joliet leases—234,000 square feet by Johnstown Supply at 3300-3500 Corporate Drive, 159,000 square feet by NGL at 2301 Ellis Court, and 112,000 square feet by Versatex Trimboard at 3401 South Chicago Avenue.
  • Flex/R&D space is limited here as well, at less than 2 million square feet of inventory according to Reis, but it has a vacancy rate of 14.9%, third lowest among the submarkets, and an average asking rent of $9.68 psf, the highest.
  • For 176 million square feet of industrial space in its I-55/I-80 submarket, Jones Lang LaSalle reports a vacancy rate of 10.8% and an average asking rent of $3.88 psf. This source reports 886,000 square feet under construction in the submarket.
  • Reis reports the 1-million-square-foot building one of Clarius Park Joliet broke ground in that city in August 2012.

South Chicago

  • For 63.9 million square feet of warehouse/distribution space in the South Chicago submarket, Reis reports a vacancy rate of 18.2% and an average asking rent of $3.59 psf, the lowest among the submarkets. The low rent in part reflects the age of the inventory here, although the rent in the adjacent North Chicago submarket, in the more affluent part of the city, is the second highest metrowide.
  • The vacancy rate fell 30 basis points in the second quarter and is also down 30 from a year earlier. The average asking rent rose 0.8% during the quarter, while the average effective rent was up 1.7% at $3.07 psf. Rents fell nearly as much in the first quarter, and are down 1.4% asking and 0.3% effective from a year earlier.
  • For 5.9 million square feet of Flex/R&D space, the vacancy rate is 15.9% and the average asking rent is $7.74 psf according to Reis.
  • The vacancy rate decreased 210 basis points during the second quarter on 124,000 square feet of positive net absorption. The average asking rent rose 0.5% and the average effective rent increased 1.6% to $6.54 psf during the quarter. The asking average is down 0.6% year-over-year, and the effective average is down 0.9%.
  • For 165 million square feet of industrial space in the City of Chicago, Jones Lang LaSalle reports a vacancy rate of 9.5% and an asking rent of $4.11 psf. For 12.3 million square feet of Flex/R&D, this source reports vacancy at 10.6% and an average asking rent of $12.32 psf.
  • “Richwell Enterprises leased 142,000 square feet of warehouse/distribution space at 5555-5561 S. Archer Avenue,” according to Colliers. “The Chicago South market has not witnessed a lease of this size since the third quarter of 2009 when Gold Eagle leased 166,800 square feet at 4404 Ann Lurie Place.”
  • Home Products International renewed for 330,000 square feet on South Archer Avenue, according to Jones Lang LaSalle.

West: DuPage County

  • The west suburban DuPage County submarket hosts 90.4 million square feet of warehouse/distribution space, the most among the submarkets, and 8.7 million of Flex/R&D space, also the most. No new space completed here in 2011, and none is under construction.
  • For warehouse/distribution space, the second quarter 2012 vacancy rate is 13.2% second lowest among the submarkets, and the average asking rent is $4.45 psf according to Reis.
  • The vacancy rate decreased 40 basis points during the second quarter on 329,000 square feet of net absorption; it is down 70 from a year earlier. The average asking rent increased 0.9% during the quarter, with the average effective rent up 1.6% to $3.91 psf. The year-over-year gains are 0.2% and 2.6%, respectively.
  • Reis reports a Flex-R&D vacancy rate of 16.5% for DuPage, along with an average asking rent of $7.44 psf.
  • The vacancy rate fell 60 basis points on 52,000 square feet of net absorption, and is also down 60 year-over-year. The average asking rent increased 0.3% during the second quarter, as the average effective rent rose 0.6% to $6.36 psf. The asking average is 1.8% lower than a year earlier, while the effective average is 0.5% higher.
  • Jones Lang LaSalle reports a vacancy rate of 9.5% for 69 million square feet of industrial space and 10.8% for 4.1 million square feet of Flex/R&D for its I-355 DuPage Corridor submarket. In its I-88 corridor submarket, this source reports a vacancy rate of 8.7% and an asking rent $3.82 psf for 95 million square feet of industrial space, and a vacancy rate of 16.0% and an asking rent of $9.60 psf for 5.5 million square feet of Flex/R&D.
  • In Addison, according to this source, Major-Prime Plastics leased 136,000 square feet. Colliers reports two leases in Carol Stream: 152,320 square feet by Zones, Inc. and 135,500 by Ingram Micro, Inc.

West/O’Hare; North O’Hare

  • For 59 million square feet of warehouse/distribution space in its O’Hare submarket, Reis reports a vacancy rate of 14.4% and an average asking rent of $5.18 psf, second highest among the submarkets.
  • The vacancy rate fell 50 basis points during the second quarter, and is down 110 from a year earlier. Year-to-date net absorption totaled 540,000 square feet. The average asking rent increased 0.6% during the quarter, and the average effective rose 1.1% to $4.48 psf. The year-over-year gains were 2.4% asking and 2.1% effective.
  • The 221,800-square-foot Yusen Logistics Inc facility in Elk Grove broke ground in July according to Reis.
  • According to Reis, the vacancy rate for 29 million square feet of warehouse/distribution space in its North O’Hare submarket is 15.6% with an average asking rent of $4.21 psf.
  • The vacancy rate increased 70 basis points during the second quarter but remains down 140 from a year earlier. The average asking rent rose 0.2% during the second quarter, while the average effective rent was unchanged at $3.64 psf. The asking average is down 1.9% year-over-year, but the effective average is up 0.3%.
  • The O-Hare submarket has 6.2 million square feet of Flex/R&D space, with a vacancy rate of 18.8% and an average asking rent of $7.59 psf, according to Reis. For 6.1 million square feet in the North O’Hare submarket, Reis reports a vacancy rate of 12.0%, second lowest among the submarkets, and an average asking rent of $7.66 psf.
  • The Flex/R&D vacancy rate increased 20 basis points in the O’Hare submarket during the second quarter, and it is up 170 from a year earlier. The average asking rent fell 0.1% during the quarter and the average effective rent decreased 0.9% to $6.35 psf. Rents are down a sharp 8.7% and 10.4%, respectively, from a year earlier.
  • In the North O’Hare submarket the vacancy rate rose 30 basis points during the second quarter as the average asking rent was unchanged and the average effective rent slipped 0.2% to $6.51 psf. The vacancy rate is up 50 basis points year-over-year, and rents are down 5.4% and 5.1%, respectively.
  • For 98 million square feet of industrial space in its O’Hare submarket, Jones Lang LaSalle reports a vacancy rate of 12.8%, and an average asking rent of $5.27 psf. For 6.6 million square feet of Flex/R&D, this source reports 16.2% and $8.55 psf.

Other Second quarter Activity

  • Reis reports two additional warehouse/distribution groundbreakings in the second quarter. A 267,000-square-foot facility for WinPak Portion Packaging Inc. started construction in Chicago Heights, in the South Cook County submarket, in August. And the 818,000-square-foot Union Pointe Business Park broke ground in north suburban Lincolnshire, Lake County in July.