With 3.1 million square feet in first-quarter construction completions and another 16.7 million square feet in the active pipeline, the Chicago industrial market continues to show positive momentum despite a slowdown in leasing and sales velocity to start the year, according to Cushman & Wakefield. The commercial real estate services firm today released its newest Chicago Industrial MarketBeat report, providing key data and an overview of current trends.
"The strong flow of industrial tenants within the Chicago market over the last several quarters has given rise to increased development of both build-to-suit and speculative product," noted Jason West, Executive Managing Director of Brokerage Services at Cushman & Wakefield Chicago. "Build-to-suit construction accounts for 53.5 percent, or about 8.9 million square feet, of our market's new, in-progress industrial inventory. High demand is encouraging developers, who have over 7.7 million square feet of speculative projects coming to market over the next nine to 12 months.
"Much of the tenant activity we are seeing involves eCommerce users and the third-party logistics companies that service them," he added. "U.S. eCommerce sales grew by a rapid 15.1 percent year-over-year in 2016, dwarfing bricks-and-mortar sales growth and providing a key source of demand for industrial space."
Still, new leasing activity for the Chicago industrial market totaled just over 3.5 million square feet during the first three months of the year, 37.9 percent below the first-quarter 2016 total. "The general consensus is that there has been a pause - not a halt - in transaction activity, which is not indicative of a slow year to come," West explained.
Leasing demand was strongest in the Interstate 80 Corridor submarket for the third consecutive quarter, with nearly 800,000 square feet in transactions. Inventory Liquidators Corporation and CTDI made two of the largest commitments, for just over 531,000 square feet in Western Cook County and 501,000 square feet in the Interstate 80 Corridor submarket, respectively.
First-quarter industrial investment sales totaled 3.0 million square feet, 42.3 percent below the 5.4 million square feet traded at this time last year. "With a presidential transition spurring an outlook shift in economic trajectory, many investors displayed a wait-and-see approach but are now gearing up for another active year," said Michael Tenteris, Senior Director of Cushman & Wakefield's Capital Market Group. "Additionally, this slowdown was anticipated after 2016 had one of the most active first quarters in the last five years."
Warehouse properties accounted for 68.0 percent of all first-quarter Chicago industrial sales. DRA Advisors' purchase of a 16-building, nearly 2.0 million-square-foot, mixed-type Illinois portfolio from Cabot Properties highlighted the market's investment activity.
According to Tenteris, an increased stream of leasing and sales activity is anticipated in the coming quarters. And the overall Chicago industrial market is expected to maintain low vacancies and see continued demand for new product from tenants of all sizes.
"Submarkets such as the ever-active Interstate 80 and Interstate 55 Corridors will stay attractive to tenants with large square footage requirements helping to decrease vacancy and tighten up rents in the next few quarters," he said. "At the same time, infill sites in and near the City of Chicago will be high on the radar of companies seeking to be closer to customers and employees."
Cushman & Wakefield's industrial brokerage platform provides global resources and local expertise for tenant and landlord representation, disposition and acquisition services, transaction management and industrial consulting including labor and demographic analysis. In 2016 globally, this group completed more than 4,799 industrial lease and sale transactions, including Capital Markets transactions, totaling nearly 185.8 million square feet with an aggregate value in excess of $6.2 billion.
About Cushman & Wakefield
Cushman & Wakefield is a leading global real estate services firm that helps clients transform the way people work, shop, and live. Our 45,000 employees in more than 70 countries help occupiers and investors optimize the value of their real estate by combining our global perspective and deep local knowledge with an impressive platform of real estate solutions. Cushman & Wakefield is among the largest commercial real estate services firms with revenue of $6 billion across core services of agency leasing, asset services, capital markets, facility services (C&W Services), global occupier services, investment & asset management (DTZ Investors), project & development services, tenant representation, and valuation & advisory. 2017 marks the 100-year anniversary of the Cushman & Wakefield brand. 100 years of taking our clients' ideas and putting them into action. To learn more, visit www.cushwakecentennial.com