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Infrastructure Investments Spur Industrial Development in Chicago Market

Industrial developers have launched new product in response to key transportation improvements around metro Chicago. Pictured is Tinley Park Corporate Center at 18700 S. Ridgeland Ave. in Tinley Park, a southern suburb of Chicago.

There is no question that all signs are pointing in the right direction for the nation’s second-largest industrial market. Midway through the year, the vacancy rate has stabilized below 7 percent for the first time in over a decade. On top of that, quarterly deliveries totaled 4.5 million square feet, of which 3.9 million square feet was speculative. In the second quarter, 7.9 million square feet was absorbed.

So what’s next for Chicago’s industrial occupiers? Luckily there are two seasons in Chicago, winter and construction. With that, state and federal agencies are collaborating on massive transportation infrastructure improvements, and funds continue to flow to improve and expand our region’s road and rail infrastructure.

Chad Buch, JLL

In addition, the Illinois Tollway has been proactively deploying capital for projects. As a result, industrial occupiers are benefitting from an enhanced flow of goods and more efficient distribution, while the industrial development community has responded with new speculative and build-to-suit projects in key areas to take advantage of these transportation improvements.

I-57 Corridor

Before 2014, there wasn’t a full four-way interchange at I-57 and I-294, which represented one of the few rare nodes in the nation where two interstates crossed paths but did not allow a full connection. The opening of the $600 million Tri-State Tollway and I-57 Interchange has since spurred an influx of new development in the I-57 submarket.

In 2017, Georgia Pacific occupied a 1 million-square-foot build-to-suit in University Park, and Seefried Properties developed an 856,000-square-foot fulfillment center for Amazon in Monee.

Just across the street in the Bailly Ridge Corporate Center, DeBartolo Development has broken ground on an 879,040-square-foot development. This stands out as the first speculative project of this cycle in what is typically described as a lower-velocity submarket. Additionally, Hillwood Properties recently completed a 296,200-square-foot speculative development in Tinley Park, from which the new interchange will provide access to the western and northern suburbs.

South Chicago

Intermodal users and rail shippers utilizing Norfolk Southern and CSX, as well as METRA commuters, will benefit greatly from the 75th Street Corridor Improvement Project. This project was recently awarded $132 million in federal funding to help separate several freight and passenger rail lines that currently intersect causing significant delays that ripple across the rail network. The next step is two to three years of final design work followed by five years of construction.

The transportation improvements within the city limits are helping to spur a development frenzy across the South Chicago submarket, as more than 1.5 million square feet of industrial construction is currently underway. The city of Chicago is also working with NorthPoint Development on a massive planned business park to contain up to 2.2 million square feet of new space on brownfields near the Ford manufacturing plant on South Torrence Avenue.

O’Hare market

The $2.5 billion I-90 Rebuilding and Widening Project, which spans 62 miles in each direction between I-294 and I-39 in Rockford, has enhanced transportation nodes in the O’Hare, Northwest Suburbs, North Kane and McHenry County submarkets. The project, which was completed in 2017, included improvements to 16 interchanges and more than 100 bridges.

This project has significantly propelled industrial development like the Elk Grove Village Technology Park. This 72-acre infill business park, which is in the beginning stages of construction, benefits from access to both the Arlington Heights Road interchange and the newly opened Elmhurst Road Interchange.

On Elmhurst/York Road, new speculative developments by Liberty Property Trust and Distribution Realty Group will benefit from direct tollway access. Hamilton Partners is proposing a speculative building in Arlington Heights, which again would mark the first speculative building within the lower-velocity Northwest Cook submarket in this cycle.

North Kane County

Completed in fall 2013, a $59 million project included construction of six new ramps that provide access to Illinois Route 47 from eastbound and westbound I-90. Previous ramps built in the 1970s only allowed access to and from eastbound vehicles. Huntley, Illinois is well positioned with large tracts of developable land with immediate access to the new, full four-way interchange at Route 47.

The largest project in this market is the redevelopment of the shuttered Huntley Outlet Mall, which is immediately adjacent to the Route 47 interchange. A group led by two local developers has proposed a big-box distribution building on the site.

Across Route 47, the Huntley Corporate Park, developed by Conor Commercial, can accommodate buildings from 30,000 square feet to 300,000 square feet. Down the Tollway, one interchange to the east at Randall Road, Zilber Property Group recently secured iHerb a 257,344-square-foot lease on Automall Drive. Conor Commercial has leased its 385,372-square-foot Northwest Pointe II speculative building to BOX Partners.

West Cook County

The planned Taft Avenue Connector and North Avenue interchange improvements, as part of the Elgin-O’Hare Western Access, is spurring development in the West Cook County submarket. The area has witnessed a particularly robust flurry of new industrial construction going up in Franklin Park on the southeast side of the airport. Currently, there are eight speculative buildings at various stages in development in Franklin Park totaling 1.9 million square feet.

Across the region, from the far south suburbs moving northwest through O’Hare and out toward Rockford, industrial and logistics companies will immediately benefit from these transportation infrastructure improvements that will undoubtedly improve efficiencies across their Midwest supply chains.

Illinois has a unique competitive economic advantage being at the crossroads of the country’s rail, air, roadway and waterway systems. Looking ahead, around the six-county Chicagoland region, the Illinois Department of Transportation has budgeted $1.84 billion in annual state and local highway projects in fiscal years 2019 through 2024. This is a strong commitment to rehabilitating and improving our road infrastructure, but be prepared to slow down when you see heavy equipment and crews working hard along the roadside — there will be short-term delays, but long-term benefits.

— By Chad Buch, Senior Research Analyst, JLL. This article originally appeared in the October 2018 issue of Heartland Real Estate Business magazine.

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