Feb. 8, 2018
As Q1 2019 gets into full swing, here’s a look at how 2018 fared and what’s ahead in the industrial, office and retail sectors.
Chicago’s Industrial Market to Expand by 18 MSF
While Chicago’s office and retail sectors declined in 2018 compared with 2017, the industrial sector showed solid growth in leasing and construction, according to Avison Young’s Annual Review and 2019 Forecast. The Chicago industrial market should see 18 million square feet of new space added in the next 12 months, including many speculative buildings. This, combined with continually decreasing vacancy rates, shows investor confidence in Chicago’s industrial markets, especially infill submarkets such as O’Hare and I-88.
Office and Retail Real Estate Moderates
The Avison Young report notes the employment picture was also bright last year, with employers in the Chicago metropolitan area adding more than 35,000 jobs year-over-year, according to this Bisnow story.
“Facebook, Google, Pinterest, Salesforce, Career Builder and Madison Capital have all recently announced major expansions in the CBD, which will increase local workforces as well as real estate footprints,” the report notes.
Q4 2018: Surge in Spec Industrial Construction in Chicago
In Q4 2018, Chicago’s speculative industrial development boom showed 19.5M SF under construction, according to research from Avison Young. That is a 59% year-over-year increase that is pushing development to new areas. This momentum has been seen for many quarters, as noted in this ULI Report.
“Many submarkets that are closer to the city have little to no space available for new buildings, so we’re continuing to see speculative development moving to outlying submarkets such as Southern Wisconsin,” Avison Young principal Chris Lydon tells Bisnow.
Chicago O’Hare Industrial Market Still Reigns
The O’Hare submarket had 4.9 MSF of new construction in Q4, increasing 50% from Q3. There is some concern about a few submarkets becoming overbuilt, however. The I-80 Corridor has the highest vacancy (12%) of any submarket, as it has seen 15.4 MSF of new construction during the past two years, with another 3.3 MSF underway.