NAI Hiffman is pleased to present the First Quarter 2019 Market Peek, a first look at the market statistics for the Chicago metropolitan office and industrial real estate markets.
Industrial: Industrial Projects Under Construction Hit Record High
At the end of the first quarter, 65 buildings totaling 23.4 million square feet (MSF) were under construction in the Chicago market, with 17.7 MSF (75.3%) to be built on a speculative basis. Thirteen projects totaling 4.6 MSF broke ground during the quarter – 3.6 MSF on a speculative basis, and 1.0 MSF of build-to-suit projects. Despite 2.7 MSF of new speculative product completed during the first quarter, the overall vacancy rate continued to decline to measure 5.66% first quarter.
Net absorption totaled more than 4.1 MSF first quarter with nearly 30 companies taking occupancy of more than 100,000 square feet (SF) during the quarter. Companies contributing to the positive absorption trend included NFI Industries in Joliet (993,000 SF ), First Logistics in Chicago (331,000 SF ), Crown Brands in Somers, WI (301,000 SF ), and FXE Warehouse in Bolingbrook (300,000 SF) all taking occupancy during the quarter. Nearly 9.8 MSF of new leasing activity occurred during the first quarter, suggesting that net absorption will remain healthy in the quarters to come.
Office: Vacancy Increases in the Suburban Market; CBD Records Positive Net Absorption to Start 2019
The overall vacancy rate increased 35 basis points to 18.52% in the first quarter of 2019. Class A average asking rents increased slightly to $26.66 per square foot (PSF) from $26.49 PSF in the previous quarter.
The suburbs recorded negative absorption of 408,667 SF in the first quarter. New leasing activity was nearly 1.4 MSF, but this was down by approximately 500,000 SF from the previous quarter. While no deliveries of new product occurred in the first quarter, there is one project is under construction in the suburban market, a 136,000-square-foot facility in Skokie that is scheduled to deliver during the third quarter.
The overall vacancy rate in the Central Business District (CBD) decreased 22 basis points from the fourth quarter, to measure 12.83%. Following three quarters of negative absorption, the downtown submarkets witnessed 337,589 SF of positive net absorption. Two leading tenants that contributed to the positive net absorption were Health Care Service Corp. moving into 63,000 sf at the AON Center, and Industrious moving into 47,000 SF in the West Loop.
The CBD recorded 2.5 MSF of new leasing activity in the first quarter. Class A asking rents increased to $43.81 PSF in the first quarter from $43.08 PSF in the fourth quarter of 2018. Nearly 5.7 MSF of office space is under construction downtown, with 96.0% of the construction activity occurring in the West Loop submarket.