Q2 2022 Industrial Real Estate Report: Chicago, IL
Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.
In the second quarter of 2022, industrial real estate in Chicago performed quite well overall amidst strong demand, significant net absorption, and a robust development pipeline.
There was an increase in average direct asking rents that was more substantial than the previous quarter’s increase: up to nearly $7.00 per square foot from about $6.50 in Q1 2022.
The average sales price per square foot, however, saw a slight decline, down from about $95 to about $94 per square foot.
General Area Overview & Demographics
The city of Chicago is located in northeastern Illinois on the shores of Lake Michigan. It is the most populous city in the state of Illinois and the third most populous city in the United States.
As of July 1, 2022, Chicago had an estimated metro-area population of about 8.9 million.
The racial makeup of the city was 48.3% White (non-Hispanic), 32.4% Black or African American, 0.9% Native American, 5.4% Asian, 3.7% from other races, and 8.4% from two or more races.
Hispanic or Latino residents of any race made up 28.1% of the population.
How much did warehouse space cost in Chicago in Q2 2022?
The cost to rent Chicago warehouse space per square foot is up to nearly $7.00 as of August 2022.
This is about a 7% increase from Q1 2022’s average direct asking rent of about $6.50.
In Q2 2022, the average sales price per square foot of industrial real estate in Chicago was about $94.
This increase in industrial rents is due to record-low vacancies permitting landlords to demand more from tenants.
The market forecast for the rest of 2022 is for vacancies to continue to decrease, net absorption to decrease, and average direct asking rents to increase.
Vacancy & Occupancy
Chicago’s industrial real estate sector continued its vacancy rate plunge and saw a record-low vacancy rate in Q2 2022 of about 4.5%.
This is a major decrease from Q1 2022’s vacancy rate of about 5.00% and Q2 2021’s vacancy rate of about 6.30%.
This continued downward trend in vacancies is thanks to organizations re-assessing supply chain needs as continued disruptions interrupt new industrial development, leading most businesses to look at what’s already on the market to lease.
The vacancy rate for industrial real estate in Chicago is expected to continue to decrease as economic uncertainty continues to plague new industrial development, leaving tenants with only what’s available on the market.
Chicago’s Industrial Real Estate Net Absorption in Q2 2022
Despite remarkably low vacancy rates in Chicago in Q2 2022, net absorption exceeded the performance of the previous two quarters: approximately 12 million square feet.
Chicago’s industrial net absorption has remained above 10 million square feet for four straight quarters now.
The I-55 Corridor, one of Chicago’s most popular submarkets, saw approximately 1.65 million square feet of Chicago’s 12 million. This submarket is currently seeing a record-low vacancy rate of about 1.3%.
The Pacing of Industrial Rents in Chicago
In the short-term, industrial rents in Chicago are expected to continue their climb as supply chain issues and economic uncertainty plague new industrial development projects, placing the advantage in the hands of landlords.
However, Chicago’s robust development pipeline of nearly 30 million square feet, upon delivery, will equalize this rise in rents, increase vacancies, and give tenants the upper hand.
Many more speculative industrial development projects are expected to take root in Chicago in the coming quarters.
Industrial Leasing Activity in Chicago in Q2 2022
Chicago industrial real estate saw a slight decrease in leasing activity in Q2 2022 as rents rose and landlords held the high ground.
Despite this slight drop, vacancy rates still fell, signalling record demand for both the purchase and leasing of Chicago’s existing industrial real estate.
Notable Industrial Real Estate Sales in Chicago in Q2 2022
Some notable industrial real estate transactions in Chicago in Q2 2022 include:
- Shapack Partner’s purchase of $60 million worth of Chicago industrial real estate for about $385 per square foot.
- Cannon Commercial’s purchase of about $35.1 million worth of Chicago industrial real estate for about $33 per square foot.
- Pritzker Realty Group’s purchase of about $28 million worth of Chicago industrial real estate for about $106 per square foot.
These are some among more notable industrial real estate transactions that took place in Chicago in Q2 2022.
Notable Industrial Real Estate Leases in Chicago in Q2 2022
Some notable Industrial real estate leases that popped up in Chicago in Q2 2022 include:
- Target Corporation’s leasing of about 256,000 square feet in Elmhurst.
- Wholesale Interiors’ leasing of about 550,000 square feet in Aurora.
- Uline’s leasing of about 750,000 square feet in Kenosha, Wisconsin (a notable submarket of Chicago).
Again, some among many notable leases that appeared in Chicago and its submarkets in Q2 2022.
Takeaways for Chicago Industrial Real Estate Investors
Chicago’s industrial real estate market is as tight as it’s ever been. Much institutional money is flowing into speculative development projects to increase vacancies, drop asking rents, and increase leasing activity.
Demand for industrial space in Chicago is not expected to fall in coming quarters; if it does, it may only offset what most may consider to be a record surplus of industrial activity in Chicago and may not negatively affect overall market health.
Do your research, stay diligent, and happy investing.
Methodology
All figures presented in this article are based on MyEListing.com’s commercial real estate listing data in corroboration with other freely available data and information covering the commercial real estate industry.
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