January 2025
Despite challenges, Chicago’s industrial market continues to grow
Chicago industrial market growth continued in 2024, according to a fourth-quarter report released earlier this month by NAI Hiffman. While the market has maintained significant growth, it is transitioning to a steadier pace following the historic boom years of 2021 and 2022.
The report highlights that Chicago’s industrial sector recorded 638,047 square feet of positive net absorption in the fourth quarter, bringing the year-end total to 8.1 million square feet. However, leasing activity slowed during the final months of the year, with 5.7 million square feet of new leases signed in the fourth quarter, a 15.4% drop compared to the third quarter.
For the full year, leasing activity totaled 31.8 million square feet, a significant decline from the 56.9 million square feet recorded in 2023. This continued a downward trend from the record-breaking 81.7 million square feet of new leases signed in 2021. According to the report, economic pressures and cooling demand have tempered the once rapid leasing velocity.
“While leasing activity remains robust, the size of individual leases has declined compared to prior years,” the report noted. This trend reflects a slowdown in the delivery of large-format industrial facilities and a strategic shift toward more localized shipping and logistics solutions.
Submarket strength: I-80/Joliet corridor leads activity
The I-80/Joliet Corridor stood out as the top-performing submarket in 2024, with 4 million square feet of new leases signed. Notable deals included Post Consumer Brands (1 million square feet), Ecolab (677,028 square feet), and RJW Logistics Group (639,917 square feet).
Since the onset of the pandemic in 2020, the I-80/Joliet Corridor has consistently been in high demand, accounting for 37 million square feet of leasing activity over the past four years.
The submarket’s appeal lies in its strategic location, offering access to key transportation routes, including major interstates and rail networks, along with its proximity to large population centers. While demand for larger industrial buildings has softened over the last two years, I-80/Joliet’s average lease size of 166,000 square feet reflects continued interest in modern, well-located facilities.
Vacancy rates and supply trends
The industrial vacancy rate in Chicago rose to 5.8% in the fourth quarter, up from 5.5% at the end of 2023 and a cyclical low of 4% in late 2022. The increase comes as 15.9 million square feet of new industrial space was delivered to the market over the past year.
New supply has consistently outpaced net absorption since early 2023, contributing to a slight softening of the market. However, speculative construction starts have decreased significantly over the past year, a trend that analysts believe will help balance supply and demand in the coming months.
About Hiffman National:
Based in the Chicago area, with an additional five regional hubs and 30 satellite offices, Hiffman National provides superior property management, project services and accounting services to a diverse portfolio including office, medical office, retail and industrial properties nationally. The firm’s comprehensive property management platform and attentive approach to service contributes to client NOI and has helped the firm to more than double in size in five years. Hiffman National is an award-winning company with more than 250 employees strategically located throughout North America.
About NAI Hiffman:
NAI Hiffman is one of the largest independent commercial real estate services firms in the US, with a primary focus on metropolitan Chicago, and part of the NAI Global network. We provide institutional and private leasing, property management, tenant representation, capital markets, project services, research, and marketing services for owners and occupiers of commercial real estate. To meet our clients’ growing needs outside of our exclusive NAI Hiffman territory, we launched Hiffman National, our dedicated property solutions division, which provides property management, project services, and property accounting services across the country. NAI Hiffman | Hiffman National is and award winning company headquartered in suburban Chicago, with more than 250 employees strategically located throughout North America.
