By: Greg Rogalla, Senior Research Analyst
The Chicago industrial market reported four current trends in Q4 2018 and three worth keeping our eye on as we head into 2019.
4 Current Trends:
#1 Robust Mid-Size Leasing Activity
2018 ended with 50% more leasing activity than 2017. Mid-size deals accounted for 46% of last year’s leasing activity.
#2 Low Vacancy & Asking Rates on the Rise
Increased leasing activity as well as a decade-low vacancy rate of 5.5% have led developers to jump into the market, which combined with increased construction costs have caused rental rates to rise. Overall asking rental rates were $5.37 psf at year-end.
#3 New Construction Steady
The market continued to record increased construction activity with 11.6 msf of product completed in 2018. The largest concentration was in the I-80 Corridor and Western Cook County submarkets. Fifty projects totaling 15.6 msf were under construction at year-end. Read more about Chicago construction.
#4 Labor Cost & Availability Remain Vital
The shortage of labor continues to drive up labor costs and encourages companies to remain in locations with their existing workforce. Average warehouse wages increased from $13.53/hour in 2000 to $18.75/hour in 2017 and continue to rise.
3 To Watch:
#1 Automation Explosion
Automation will impact warehousing footprints and building design through the incorporation of lights-out warehousing, electronic monitoring centers, rooftop communications systems and other technologies. It will result in new manufacturing jobs, increased productivity and changing roles for workers.
#2 Last Mile User Activity to Remain Strong
Last mile user activity will continue to increase as city spec space comes to market, consumers expect ever-faster deliveries, and logisticians vie for every square foot of last mile space. Chicago’s largest 3PL transactions in 2018 were 330,000 sf to First Logistics at Marina Crossings, represented by Cushman & Wakefield’s Industrial Services Group, 210,000 sf to Jaws Wholesale Distribution and 100,000 sf to National Express.
#3 Investment in Opportunity Zones
As available land sites become more scarce, industrial developers will look more closely at opportunity zones especially in areas with strong job, income and population growth. There are 135 opportunity zones in Chicago on the south and west sides.
Greg Rogalla serves as Senior Research Analyst for Cushman & Wakefield’s Industrial Services Group in Chicago. Greg has over six years of commercial real estate research experience and is focused on industrial research – building databases, developing proactive research, and improving research processes.