The overall Chicago industrial market, including Southern Wisconsin and Northwest Indiana, contains nearly 1.2 billion square feet of inventory and currently reflects an availability rate of 8.5%, a 20 basis point decline from 2Q 2013. The Chicago industrial market’s availability rate has not been that low since 3Q 2007.

User sales totaled 14 million square feet, 118% of the total posted one year ago. Some of the largest transactions include Warehouse Specialists Inc.’s 496,260 square-foot purchase in Sauk Village and the 140,698 square-foot purchase by Specialty Binding in Bolingbrook. Construction continues to ramp up as large blocks of available Class A space continues to dwindle. Year-to-date, there has been 5.0 million square feet in
new construction, 55% of which are speculative projects. The last similar level of speculative construction activity dates back to 3Q 2008.

21 projects, totaling 5.5 million square feet, are currently under construction. Of that total, 54% total nearly 3 million square feet and are pre-leased.

Chicago’s position as a dominant market in the modern supply chain remains solid. In the previous development cycle, the Far Southwest (I-55 corridor) was the big winner landing a significant share of the new big box development. In this cycle, the Joliet submarket, with its abundant land sites, proximity to major rail intermodals and interstate highways, and easy access to both the city and the growing south and western suburban population is best positioned to capture new development especially in the very large scale big-box market.

I-80/Joliet Corridor

VACANCY AND SUPPLY

User demand in the I-80/Joliet Corridor continued to outpace space returning to the market in the third quarter. This dropped the vacancy rate to 10.26 percent, a 47-basis-point improvement from the second quarter level of 10.73 percent.

Available space in the I-80/Joliet Corridor fell slightly to 7.2 million square feet in the third quarter, down 4.1 percent from the second quarter level of 7.5 million square feet. This was partially attributed to increased sale activity during the quarter.

CONSTRUCTION ACTIVITY
Build-to-suit activity continues to drive new construction deliveries in the I-80/Joliet Corridor. Two build-to-suit truck terminal projects were completed at the Crest Hill Business Park in the third quarter, adding 198,800 square feet to I-80/Joliet Corridor’s inventory base. Dayton Freight moved into 131,300-square-foot, 186-door terminal while Old Dominion took possession of a 67,500-square-foot, 100-door terminal.

One speculative development commenced construction in the third quarter. CenterPoint Properties is building a 485,000-square-foot facility at CIC Joliet Park, just the second large scale speculative development to break ground in the submarket since 2008.

LEASING AND SALE ACTIVITY

The I-80/Joliet Corridor third quarter leasing activity total of 654,500 square feet was the market’s lowest quarterly output so far this year, declining from 913,300 square feet leased in the second quarter.
One significant lease transaction occurred in the third quarter when Electrolux expanded into 365,300 square feet at 801 Midpoint Road in Minooka. The kitchen appliances distributor now occupies the whole 965,200-square-foot facility. This transaction alone represented over one-half of all I-80/ Joliet Corridor third quarter transactions.

Three sales were recorded in the I-80/Joliet Corridor during the third quarter, bringing the total transaction volume to 215,100 square feet. Only 13,200 square feet of sale transactions were completed in the prior quarter.

NET ABSORPTION
Heightened sale activity contributed to the positive net absorption of 473,700 square feet reported in the third quarter. However, this is considerably lower than the second quarter mark of 2.2 million square feet which was bolstered by a 1.6 million-square-foot build-to-suit lease that came on line during that time.

TOP THIRD QUARTER 2013 TRANSACTIONS

TENANT/BUYER SIZE (SF) ADDRESS TYPE
Electrolux 365,303 801 Midpoint Road, Minooka Lease
Dayton Freight Lines 131,300 16911 Enterprise Boulevard, Crest Hill Sale
Black Horse Carriers, Inc. 100,144 4000 Rock Creek Boulevard, Joliet Lease

Statistics for Joliet Submarket

Rentable Building Area Availability Rate (%) Vacancy Rate (%) YTD
USER SALES (SF)
YTD LEASING ACTIVITY (SF) NET ABSORBTION (SF) UNDER CONSTRUCTION (SF) AVERAGE ASKING LEASE RANGE ($/SF/YR)
54,581,146 12.8% 12.2% 146,497 1,042,335 346,781 1,474,086 $2,75 to $4.25