Illinois Real Estate Journal August 2013 : Page 1

VOL.16 NO.4 ©2013 LAW BULLETIN PUBLISHING CO. AUGUST 2013 Build-to-suits continue to be the trend in Chicago industrial market By Brian Wasag Chicago industrial vacancy rate continues its ‘dramatic’ descent By Brian Wasag T B uild-to-suits remain the trend in the great-er Chicago-area industrial market, despite the reemergence of speculative construc-tion. Quality class A industrial space had been dwindling in the Chicago market, and companies were more willing to pursue build-to-suit opportunities, rather than to retrofit existing space to meet their needs, according to an industrial market report by Cushman & Wakefield of Illinois Inc. Existing facility concerns like higher ceiling height requirements and increased loading docks helped propel the 3.4 mil-lion square feet of build-to-suit projects completed in 2012, with more expected in 2013. “Due to the lack of supply of class A, institution-al-grade speculative buildings, new requirements are being resolved via build-to-suit transactions,” said Thomas Boyle, principal with Newmark Grubb Knight Frank. The overall Chicago industrial market, which includes Southern Wisconsin and Northwest Indiana, contains nearly 1.2 billion square feet of inventory and currently reflects an availability rate of 9.1 percent, a 20 basis point decline from third quarter 2012, according to CBRE. The metro area subtotal also registers in at 9.1 percent, a 40 basis point decrease. Both numbers reflect a significant drop of 90 and 110 basis points, respectively, when com-pared to one year ago. Jack Rosenberg, principal at Colliers International, said he sees a tightening of the market, particularly for larger users. “At the worst part of the economic downturn there were 17 buildings that could deliver a half million square feet or more in I-55 and I-80 and last year there were only four,” he said. “What’s happened is that without new spec construction, the market has really tightened up, espe-cially for the bigger users.” During the second quarter 2013, two buildings totaling 407,198 square feet were completed in the Chicago market area, according to an industrial market report by CoStar. This compares to four buildings totaling 1,857,142 square feet that were completed in the first quarter 2013, three buildings totaling 322,138 square feet completed in the fourth quarter 2012, and 1,413,345 square feet in five buildings completed in the third quarter 2012. CONSTRUCTION (continued on page 13) he metro Chicago industrial market’s vacancy rate continued its descent during the second quarter as leasing demand remained strong. The industrial vacancy rate in the Chicago market area decreased to 9.1 percent at the end of the second quarter 2013, according to a mid-year industrial re-port by CoStar. The drop continued a string of recent vacancy decreases. The vacancy rate was 9.5 percent at the end of the first quarter 2013, 9.7 percent at the end of the fourth quarter 2012 and 10.1 percent at the end of the third quarter 2012, according to the CoStar report. “That’s a pretty dramatic improvement and it was really the result of stronger leasing demand coupled with a nominal amount of space returning to the market,” said John Abuja, vice president, investments at Marcus & Millichap Real Estate Investment Ser-vices. “We’re not overbuilt as are other areas of the country right now.” INDUSTRIAL (continued on page 23) DIRECTORIES: MULTI-FAMILY FINANCE & TOP PROPERTY MANAGEMENT FIRMS, p.28 PRSRT STD U.S. Postage PAID TWIN CITIES, MN PERMIT NO. 31515

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