Southwest corridor continues to expand.

by admin

What area is your expertise?
Chicago Metropolitan Market

What trends do you see presently in industrial development in your area?
1). A slowing in closing of sales and execution of leases.
2). A 1.3 percent rise in vacancy rates. Our Midway and South Cook County markets, however, have experienced the highest vacancy rates at 12.3 and 11.1 respectively.
3). Quarterly absorption in fourth quarter 2007 was a positive of 3.5 million square feet to first quarter 2008, which was a negative absorption of 2.5 million square feet.
4). Leasing activity has dipped 10 percent from same time last year.
5). Average sales prices have increased for Industrial product from $59.48 square feet fourth quarter 2007 to $61.81 first quarter 2008 even though sales during those two periods have dropped from 3,750,000 square feet to 3,250,000 square feet (first quarter 2008). Approximately 12 million square feet of projects are under construction at this time and much of the space has yet to lease to the first tenants.

What type of industrial product is doing well in your area?
Across the board: From 20,000 square feet to 1 million square feet, with a more rapid conclusion to sales and leases on the smaller product.

Who are the active industrial developers in your area?
ProLogis, OPUS, First Industrial, CenterPoint, IDI, Panattoni, Pizzuti, Ridge Realty Trust, AMB, Duke, TCB, and Liberty Property Trust.

Please name one or two significant industrial developments in your area. What impact will these projects have on the market?
Minooka Ridge and Opus Development. 860,000 square feet was sold to Macy’s for $38 million. Many other national developers are here.

Where is the majority of development taking place? Why is this area doing well?
Southwest of Chicago and Interstate 80. Lower priced, large farm sites, 500,000 square feet to 1 million square feet projects planned. Major east-west artery between New York and California and many large logistics tenants. Also two major intermodals projects are here for the BNSF and UP rail companies. These are the major United States east-west carriers.

What area do you expect to be the next big industrial development market? Why?
Continuing further out in the southwest corridor.

What impact do current interest rates have on the industrial market? What predictions do you have for interest rates and their effect on the industrial market in the next year?
One more year, and they will begin to firm up. The Chicago industrial market has always been somewhat bullet proof in that it may swing 10 percent up or down but the swings are always quite small compared to more volatile markets, and more volatile products (e.g.: Office). Our market consists of 1.3 billion square feet (only New Jersey and Los Angeles have similar numbers) and the Chicago market is always fairly active.

What industries do you expect to expand in the next year to absorb a great deal of industrial space? What areas will be affected?
Continued high demand for third party logistics users as major corporations continue to outsource their trucking and warehousing to vendors. Chicago is also a major market for food users.

Submitted by Jim Swartchild, executive vice president with the Chicago office of Paine/Wetzel ONCOR International. Posted online 08-12-08.

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