The industrial real estate market in Chicago and its suburbs hit several high points in the third quarter of 2023. For example, according to his recent Savillis report, a number of very large industrial transactions took place within his I-55 industrial corridor in the western suburbs. These transactions included the leasing of very large industrial spaces by Ulta Beauty and a number of large industrial buildings sold to large, well-known companies such as ProLogis and Sarofirm Realty Advisors. The vacancy rate for industrial real estate in the I-55 corridor is currently very low at 2.4%. Chicago’s overall industrial real estate vacancy rate increased slightly year over year from 4.6% in Q3 2022 to 5.1% in Q3 2023.
CBRE Real Estate’s recent mid-year real estate outlook suggested that industrial rentals in 2023 will be stronger than expected. The report noted that some of Chicago’s industrial markets are seeing double-digit rent increases. However, CBRE also noted that vacancy rates may continue to rise in 2023 and 2024 as new construction starts continue. CBRE also noted that high interest rates are likely to continue until 2024, and the risk of a mini-recession looms over all real estate sectors.
Newmark has released its 2023 Interim Industrial Real Estate Report. The report noted a number of large industrial deals in and around Chicago, including Unilever’s major lease of 1.6 million square feet (sf) of industrial land in New Lenox. . Bank of America also purchased more than 600,000 square feet of industrial land in Aurora. Despite numerous headwinds in the market, 2023 saw a number of large leases and sales of industrial properties in the Chicago area.
The industrial real estate market faces many of the same headwinds that other sectors face due to high interest rates and economic uncertainty. However, this market is driven by steady demand for warehouse space generated by e-commerce. The industrial CRE sector continues to be far less uncertain as a long-term investment compared to other real estate sectors such as office and retail.
Our law firm has extensive experience negotiating industrial leases and representing clients in the purchase and/or sale of industrial real estate. If you have any questions about industrial real estate or commercial real estate in general, please feel free to contact us.