The Chicago industrial market remained very strong through the ďŹ rst half of 2018.
the state of... CHICAGO Industrial Market
Q2 2018
THE STATE OF... Chicago Industrial Market Q2 2018
The Chicago industrial market remained very strong through the first half of 2018. According to Newmark Knight Frank research, the market’s absorption was lower than usual and vacancy increased slightly, but the asset class is still performing well and is projected to keep its record pace for at least the near future.
Current Conditions The modest rise in vacancy during this period can be attributed in part to the delivery of 2M of vacant spec space. But despite the slight increase in vacancy and significant drop in net absorption, availability is significantly lower which means some of the newly delivered space is being taken. As a result, rent rates have reached a new record high.
RENT
VACANCY
to $5.38/SF
to 8.1%
Rental rates continued to increase to a new record of $5.38/SF
Vacancy increased slightly with 10 basis points to 8.1%
AVAILABILITY
ABSORPTION
by 4.8M SF
to 4.1M SF
Availability drop indicates the newly delivered space is being taken
Net absorption dropped significantly from 7.1M this time last year
Market Summary
1.135 1.13 1.125 1.11 1.05
1.13 BSF
8.20%
4,500,000
5.4
8.10%
4,000,000
5.38
8.00%
1.13 BSF
7.90%
8.1%
1.0
3,000,000
0.85 0.5
Total Inventory
3.81 MSF
7.5%
500,000
7.20%
0
Vacancy Rate
19.3 MSF
15 $5.32
10
12.3 MSF
13.0 MSF
5.26
1,000,000
7.30%
5
20
5.28
1,500,000
7.50%
5.24
0.3
Net Absorption
$5.26
Year Ago Period
6
5.34
5.3
2,000,000
7.60%
5.36
Prior Quarter
25 $5.38
5.32
2,500,000
7.70%
7.40%
3.87 MSF
3,500,000
8.0%
7.80% 1.11 BSF
Current Quarter
5
2 1
1.6 MSF
0
0
Average Rent
4.1 MSF
3
5.22 5.2
5.3 MSF
4
Under Construction
Deliveries
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New Development The I-80 Corridor continued to deliver for the Chicago Industrial Market the ďŹ rst half of 2018. Over 4.5 million SF of new construction was delivered including 3M SF in build-to-suit properties and 1.5M in vacant spec buildings.
I-80 Corridor Inventory
by 20M SF in the last 5 years
4.5M SF New Construction Delivered
3M SF
Unless tenants commit to these spaces, the vacancy rate will continue to rise through the end of the year.
1.5M+ SF
build-to-suit
vacant spec
1.25M SF IKEA
1.5M SF
General Mills
.25M SF Costco
1.2M SF
Logistics Center
by Ketone Partners in Joliet
0.3M SF
Corporate Center
by Hillwood in Tinley Park
Space Shortage There remains a shortage of cold storage facilities, mostly because the construction costs for these properties can be up to 4 times higher than for general industrial space.
Existing Space
Vacancy
Rent Rates/SF
Demand
5M SF
5.3%
$9.75-$14
>850,000SF
Tenants seeking cold storage facility space need to set aside enough time for what could be a lengthy search.
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Major Transactions and Investment Sales The Chicago industrial investment sales market showed no signs of decelerating through the first half of 2018. At the end of Q2 2018, the Chicago metro area has completed over 1.6 Billion in investment sales - a 27.6% increase from the same time last year.
Investment Sales Completed by End of Q2
Increase in Investment Sales from Last Year
One of the largest Individual Property Sales - Yusen Logistics from Duke Realty
1.6 Billion
27%
$24.7M (for 212,000SF or $117/SF)
Blackstone purchased the Canyon Industrial Portfolio. Consists of 146 buildings - warehouses & distribution. Tenants include Amazon, FedEx, Coca-Cola, and Fiat.
$1.8 Billion - incl 4.1M SF in Chicago
Other Select Sales Maple Tree
700,200SF
$39/SF
LBA Realty
636,434SF
$25/SF
TA Realty
459,070SF
$93/SF
Skilled Labor Shortage Becomes An Issue For Industrial Unemployment rates continue to fall, causing a shortage in skilled labor In May, Chicago’s unemployment rate fell to 3.3% from 5.6% in January 25% of manufacturing industry employees are close to retirement
Issue finding people with the right professional and technical skills This shortage has not yet had an impact on economic growth 65 new jobs estimated from Wieland Metals expansion in Wheeling
Chicago’s High Income Population on Growth Trajectory The number of households that earn more than $100,000 a year and are headed by a person under 45 grew by 26,000 - more than any city in the U.S. with the exception of New York The number of households making at least $200,000 a year grew to 75,000. However this growth lagged behind that of other cities, including Denver, Houston, and San Francisco These factors indicate a talented, educated workforce. For the industrial sector, this means increased demand for last-mile facilities in the Chicago area.
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Economic Conditions home to 400+ major corporate HQs, including 31 Fortune 500 companies
growth in professional & business services, and information sector
One of the World’s Largest Economies
Industrial market nearing an end to record-breaking pace
unemployment rate dropped significantly since Jan 2018
continues to attract top talend and that draws in employers
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Looking Forward
Sustained demand for high-quality, well-located space
Vacancy will remain slightly elevated
Another Record-Breaking Year
Need for last-mile fullfilment centers, warehouses, and distribution centers
There still is 10.5M SF of construction left to deliver
Investment sales going strong; another record-breaking year forecasted
the state of... CHICAGO Industrial Market
Q2 2018
The State of Chicago Industrial Market Q1-Q2 2018 Report was created using data from the following sources: Newmark Knight Frank Bureau of Labor Statistics Colliers International
