By Marc Hale, DarwinPW Realty/CORFAC International
The Chicagoland industrial market continues to stand out as one of the most important in the country. Its location at the center of the U.S. transportation network gives companies the ability to reach nearly one-third of the nation’s population within a single day’s drive.
Six Class I railroads, an abundance of intermodal facilities and seven major interstate highways all converge here, making it one of the most efficient distribution platforms in North America. Chicago O’Hare International Airport also ranks among the top cargo airports in the world, adding critical global connectivity.
These advantages are reinforced by a large and diverse labor pool, which has long supported the region’s position as a major hub for manufacturers, distributors and logistics providers. The area’s role as a manufacturing hub is further reinforced by its proximity to major steel mills and primary metal production facilities, the depth of its skilled workforce and plentiful access to water from Lake Michigan, which has long supported heavy industry and advanced manufacturing across the region.
The market’s vacancy rate has been trending higher, moving from 5.2 percent in the third quarter of 2024 to 5.9 percent in the third quarter of 2025. Despite the increase, the market is still tighter than both its 7.4 percent historical average and the 7.5 percent national benchmark. Net absorption over the past year reached 11.9 million square feet, but new supply of 17.4 million square feet has outpaced demand, leaving portions of recent deliveries still working through lease-up and adding to the sense of slower velocity in the market.
While rents remain on a slight upward climb, the more noticeable trend is the rise in concessions, with landlords increasingly using abatement and flexible deal structures as the primary tools to attract and retain tenants. Beyond these supply and demand dynamics, fiscal and policy challenges are also shaping the market.
Ongoing fiscal issues
Despite the strengths of the Chicagoland industrial market as a national hub, ongoing fiscal challenges at both the city and state level continue to create uncertainty. Illinois faces persistent budget pressures, and the City of Chicago faces structural deficits that increase the likelihood of pursuing new revenue measures.
The city projects a $1.2 billion budget shortfall for 2026, its largest on record, and Moody’s downgraded Chicago’s credit outlook earlier this year, underscoring investor concerns about long-term fiscal stability. Property taxes remain a potential tool for the city and county to address budget gaps, and additional increases could add to the cost burden for property owners and tenants alike.
In addition to these government-induced headwinds, persistent uncertainty surrounding tariffs and trade policy has forced some deals to hit pause while trade agreements are finalized. The lack of clarity has made both tenants and investors more deliberate in their decision-making, adding another layer of caution to the market.
The Chicagoland market is still working through fiscal pressures, trade policy uncertainty and tight lending conditions that have kept deal cycles extended. These challenges define the near-term environment but do not change the area’s long-term position as one of the country’s most strategic industrial hubs.
Even with these headwinds, the Chicagoland industrial market maintains competitive advantages that few markets can match. Its location, infrastructure and labor force keep it a critical link in the national supply chain, and investor capital remains active, with capital positioned to support long-term growth. The recent shift in interest rates is beginning to ease some of the financial pressure, and over time, this should create a more favorable environment for both buyers and sellers.
In the near term, the market is likely to remain selective and cautious. Longer term, the region’s fundamentals provide a resilient base that positions it to recover and remain one of the most strategically important industrial markets in the country.
Marc Hale is an associate with DarwinPW Realty/CORFAC International. This article originally appeared in the October 2025 issue of Heartland Real Estate Business magazine.