Chicago’s Warehouse Development Boom

From “Chicago’s Warehouse Development Boom” – Chicago Industrial Properties

Chicago’s industrial market is experiencing record-breaking warehouse development, fueled by the continued rise of e-commerce, supply chain resilience efforts and the city’s strategic location as a logistics hub. Companies like CenterPoint Properties, Northern Builders and Logistics Property Company are leading the charge, adapting to shifting demand while addressing the need for sustainable growth and specialized facilities.

From taking advantage of Chicago’s robust transportation infrastructure to embracing redevelopment and community engagement, these firms are shaping the region’s future as they respond to both short-term market fluctuations and long-term industrial trends.

‘Strategic Growth’ with NAI Hiffman’

Chicago has always been a major distribution hub, said Kelly Disser, executive vice president and principal of NAI Hiffman, citing its extensive transportation infrastructure.

“Major interstate highways come through Chicago – I-90, I-80, I-55, I-94, I-65, I-57, and connecting I-294 and I-355,” Disser said. “All Class I railroads, east/west railroads intersect in Chicago (CN, UP, BNSF, CP, NS, CSX), we have many intermodal rail yards and the inland ports result in many goods coming through Chicagoland. In addition to all of this, we are the largest Midwestern city by a lot and have close to 10 million residents/consumers in greater Chicagoland. It makes sense for dense distribution based on the demographics and infrastructure.”

As a result, the warehouse market in Chicago is booming and NAI Hiffman is capitalizing on the region’s record-breaking development and adapting to changing demand patterns.

“We have three excellent quality buildings our team is diligently focusing on leasing, ranging from 450,000 to 600,000 square feet.” Disser said. “Each of these buildings can be leased today at a rate which is less than what the lease rate would be if any of the three buildings were replicated today in the subject submarkets with comparable infrastructure.”

Breaking down the market’s current conditions, Disser observed that record-breaking deliveries of distribution centers resulted from a surge in demand during the pandemic. Now he says there appears to be a moderation and right-sizing as many industries adjust back to a ‘normal’ pace of business.

“Those who expanded too rapidly are giving back space or have surplus space; those who were more tempered in their growth immediately coming out of the pandemic now have the opportunity to take market share and are being opportunistic to capitalize on opportunities presented,” Disser said. “These are the types of companies we enjoy working with for strategic growth.”

CenterPoint’s ‘sustainable development’

CenterPoint Properties is approaching Chicago’s industrial market with a focus on sustainable development and strategic redevelopment. Michael Brazeal, manage of development transactions for the Central Region, emphasized the company’s efforts to align with new logistics trends, such as e-commerce and supply chain resilience.

“Several factors fueled Chicago’s warehouse development boom in 2023. Some are new, while others are long-standing reasons behind Chicagoland’s emergence as a major logistics hub,” Brazeal explained. “On the newer sides, the continued growth of e-commerce has led to updated inventory strategies aimed at preventing the supply chain disruptions the nation and the world experienced during the pandemic.”

In addition to short-term market responses, CenterPoint is looking ahead to key areas of growth.

“However, we anticipate demand will rise in several key areas once (uncertainty around the upcoming election) passes,” said Brazeal. “Drivers of this growth will include the need for infill warehouse locations, sustainable and green facilities, automated warehousing and increased cold storage capacity.”

CenterPoint also takes an active approach to community engagement, which has been integral to the company’s success in projects across the country.

“CenterPoint’s development teams across the country actively engage with the communities in which we operate, promote sustainable development and align economic benefits with local priorities,” Brazeal said, adding that this includes early engagement with stakeholders and responding to their concerns during the planning process.

One of CenterPoint’s significant projects is a newly completed 976,954-square-foot speculative building at 2903 Schweitzer Road in Joliet, Illinois.

“The Class-A facility is adjacent to the Houbolt Road Extension bridge, putting it mere minutes from I-80,” Brazeal said.

NAI Hiffman’s Dan Leahy and Adam Roth are handling the leasing efforts for the facility.

The ‘two-way street’ at Northern Builders

Northern Builders is capitalizing on the increased demand for specialized industrial space in Chicago, with a focus on build-to-suit and cold storage facilities.

“Whether you are buying groceris, a new sweater or a pool noodle, consumers want products at a competitive price as quickly and conveniently as possible, which has required businesses to continue strategically expanding  their warehouse and distribution footprints across the country,” said Matthias Trizna, vice president of development.

Northern Builders has several significant projects underway in the Joliet and New Lenox areas. One of these is a speculative 802,440-square-foot cross-dock facility, which is expandable to 1.2 million square feet.

“It can accomodate up to 600 car parking stalls, 175 dock positions and 178 trailer stalls,” Trizna said.

Another key project is a 70-foot-tall, state-of-the-art 202,759-square-foot cold storage facility for Agile Cold Storage, with expansion capabilities of up to an additional 150,000 square feet.

In addition to its industrial developments, Northern Builders is diversifying with a $70 million multi-phase sports campus on 100 acres. The project will include 29 youth baseball and softball fields, 12 soccer or multi-use fields, two full-service concession stands, a beer garden, playground and 10 batting cages.

Through every project, Trizna stressed the importance of collaboration with communities and policymakers.

“It’s really a two-way street partnership. On the developer side of the equation, you need to be cognizant of the community and the neighbors when working through the design and site planning efforts first and foremost,” he said, referencing their developments at Carlow Corporate Center, Plainfield Business Park and Cherry Hill Business Park. “We always try to go out of our way to invite council members and staff officials to tour our many projects.”

‘Higher-end Building Approach’ sets Logistics Property Company apart

As the demand for logistics space in Chicago evolves, Logistics Property Company is taking a unique approach to Chicago’s industrial market by focusing on infill locations and long-term ownership. The company’s emphasis on building high-quality, high-finish logistics facilities has allowed it to thrive even as the market adjusts post-pandemic.

“We continue to see a focus on locating as close as possible to the end customer,” said Aaron Martell, executive vice president of the central region, who sees infill locations as critical  to his company’s strategy. “Given the lack of available sites and maturity of some of these infill markets, there will be a big lag in the supply of new functional product. Rents will grow and vacancies in these locations will remain very low.”

One of the company’s hallmark projects is the region’s first multi-story logistics facility, located at 1237 W Division.

“We’re excited to be nearing completion of such an amazing project,” Martell said. “We’re excited about leasing prospects as we finish 2024 and enter 2025.”

Logistics Property Company’s long-term approach also extends to its community engagement strategy, ensuring its developments meet both market demands and community expectations.

“The best outcomes for development really come from first listening to the communities where we want to invest,” Martell explained. “Given our belief in long-term ownership, we build a building that has a higher finish than a typical commodity merchant developer product. That higher-end building approach has worked well in the communities where we’ve developed projects.”

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.