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Chicagoland's Industrial Real Estate Muscles Through Tough Environment
Wednesday, October 11, 2023

The industrial real estate market for Chicago and it suburbs witnessed some high points in 2023’s 3rd quarter. For example, according to a recent Savillis report, a number of very sizable industrial deals occurred within the I-55 industrial corridor located in the West suburbs. These deals included a very large lease of industrial space by Ulta Beauty and a number of sizable industrial buildings that sold to well-known larger companies such as ProLogis and Sarofirm Realty Advisors. The vacancy rate for industrial real estate within the I-55 corridor is now a very low 2.4%. Chicago’s overall vacancy rate for industrial real estate creeped up slightly year-over-year from 4.6% in Q3 2022 to 5.1% in Q3 2023.

A recent CBRE Real Estate mid-year real estate outlook suggested that industrial leasing has gone better than expected in 2023. This report pointed to double digit rent increases being witnessed in some parts of Chicago’s industrial market. However, CBRE also noted that vacancy rates may continue to increase in 2023 and 2024 as new construction continues to come online. CBRE also noted high interest rates are likely to continue going into 2024 and the risk of a modest recession does loom over all real estate sectors.

Newmark released its 2023 mid-year industrial real estate report. It pointed to a number of large industrial transactions having occurred in or around Chicago, including the large Unilever lease of 1.6 million square feet (sf) of industrial space in New Lenox. Bank of America also purchased over 600,000 sf of industrial space in Aurora. Despite a number of market headwinds, many sizable leases and sales of industrial real estate have occurred in the Chicago-area during 2023.

The industrial real estate market faces many of the same headwinds other sectors face by way of high interest rates and economic uncertainty. However, this market is boosted by the steady demand for warehouse space that is created by e-commerce. The industrial CRE sector continues to face far less uncertainty as a long term investment relative to other real estate sectors, such as office and retail. 

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