May 2024
Hiffman Releases Q1 2024 Construction Pipeline Report
NAI Hiffman is pleased to present the Q1 2024 Construction Pipeline Report for industrial development in the Chicagoland market.
Record Amount of Deliveries During 2023
Chicago’s industrial market continued to grow during the first quarter of 2024, albeit at a slower pace than was seen throughout 2023. A total of 8.3 million square feet were completed by developers during the first quarter across 18 buildings. Of these, 6.5 million square feet or 78% of all completions were speculative buildings. The remaining 22% comprised 1.8 million square feet of build-to-suit facilities.
After seeing so many buildings delivered from 2021 through 2023, 8.3 million square feet pales in comparison, but it should be noted that many discussions circled around the concern that Chicago’s industrial market is becoming overbuilt. However, from the first quarter of 2017 until the first quarter of 2024, the average quarterly deliveries of industrial space is 5.9 million square feet. 8.3 million square feet is a much healthier number than the 12.4 million square feet and 13.1 million square feet completed in the third and fourth quarters of 2023, respectively.
Those concerned with oversupply of the market can rest assured that the new supply of industrial buildings has slowed considerably, allowing the market to reset itself to a healthier equilibrium. A total of 10 buildings broker ground during the first quarter, totaling 2.7 million square feet, adding to the current total of 13.4 million square feet under construction. This is far below the recent peak of 27 new construction starts seen in the fourth quarter of 2022.
Anticipate a transition towards customized build-to-suit facilities dominating the construction landscape. Following the surge in online shopping, the demand for new warehouses intensified. Commencing construction on speculative properties was logical in the years 2021, 2022, and 2023. However, as many of these spaces are now occupied by tenants, the market is approaching a new balance where vacant speculative buildings risk prolonged vacancies, prompting a pivot towards build-to-suit options. Currently, 43 buildings are under construction in Chicagoland, totaling 13.4 million square feet. Among them, 7.4 million square feet are speculative facilities, while close to 6.0 million square feet are being developed on a build-to-suit basis.
Developers’ faith in fully leasing speculative buildings has started to diminish. Nonetheless, during the first quarter of 2024, 3.5 million square feet of newly built, first-generation space (constructed in 2022 or later) was either leased or purchased by users. The demand for contemporary warehousing and distribution space will be leased or sold by the end of 2024 or early 2025, accompanied by an increase in new construction commencements during the same timeframe.
More information including complete submarket reports and notable projects under construction are available in the full Q1 2024 Construction Pipeline Report; click here to access the download.
Contact Us
Dan Worden
Research Analyst
630-398-8932
dworden@hiffman.com
Nick Schlanger
Director of Research Services
630-691-0600
nschlanger@hiffman.com
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 an award winning company headquartered in suburban Chicago, with more than 250 employees strategically located throughout North America.
About Hiffman National:
Hiffman National is one of the US’s largest independent commercial real estate property management and advisory firms, providing institutional and private clients exceptional customized solutions for property management, facility management, advisory services, accounting, lease administration, lender services, project management, marketing, and research. The firm’s comprehensive property management platform and attentive approach to service contribute to successful life-long relationships and client satisfaction. As a nationally bestowed Top Workplace, and recognized CRE award winner, Hiffman National is headquartered in suburban Chicago, with more than 250 employees nationally and an additional six hub locations and 25 satellite offices across North America.
