Chicago's Industrial Real Estate Market Faces Dwindling Supply Amid Rising Demand

There is a significant decrease in new industrial projects in the Chicago area for the remainder of 2024. Colliers, in their first-quarter 2024 report, highlighted a sharp decline in the pipeline of new industrial projects, the lowest in nearly six years. With the decrease in new projects, users seeking warehouse or distribution space in the Chicago area might face challenges finding suitable existing spaces to meet their needs.

Construction Landscape

As of March, only 40 industrial buildings were under construction, totaling 12.5 million square feet. This marks a substantial decrease from nine months prior when construction was ongoing on 92 buildings totaling 34.5 million square feet. During the first quarter of 2024, 19 new industrial buildings totaling 6.6 million square feet were completed. Notably, 84% of these were constructed on a speculative basis, the lowest figure since the second quarter of 2023.

Vacancy Rates

Despite the slowdown in construction, the vacancy rate for newly finished speculative buildings increased to 20.58%. However, the increase was at a slower pace for the second consecutive quarter, suggesting a potential peak in the vacancy rate.

Leasing Activity

Despite the slowdown, tenants signed 20 new leases totaling 2.7 million square feet in recent speculative products. Colliers predicts that if leasing activity in modern facilities picks up, the vacancy rate could start declining as soon as the next quarter.