July 2025
Spec Construction Overtakes Built-to-Suit in Strong Industrial Market
Developers are still optimistic about Chicago’s industrial market despite fears of oversupply, which began to take hold last year, following the pandemic fueled industrial building boom.
“There is now much more clarity in the market regarding where new construction will perform best. Building in high-demand areas, such as those closest to labor availability, highways and airports, makes much more sense given the high leasing volume for new spec products,” Worden said.
Speculative industrial development overtook built-to-suit projects in the second quarter, for the first time since early last year, according to NAI Hiffman.
Many developers took a year to reassess the market and determine how long it would take for the massive amount of spec product to be leased, following the 2023 surge in construction, said Dan Worden, a research analyst with NAI Hiffman.
“There is now much more clarity in the market regarding where new construction will perform best. Building in high-demand areas, such as those closest to labor availability, highways and airports, makes much more sense given the high leasing volume for new spec products,” Worden said.
The shift signals that developers are optimistic the industrial sector will be supported by growth in distribution hubs driven by e-commerce and demand for developments like data centers that are needed to support AI.
There are 11.4 million square feet of industrial space under construction in the Chicago area, of which 50.5 percent is speculative.
Notable projects include a 1.2 million-square-foot speculative development by DHL in Plainfield, and an 802,000-square-foot speculative property in Joliet being developed by Northern Builders.
On Chicago’s Southwest side, local firm Bridge Industrial is under contract to buy Ford City Mall with a $150 million plan to demolish the 960,000-squarefoot shopping center and replace it with a four-building logistics complex spanning 913,000 square feet.
Existing properties have been trading hands as well.
Houston-based Hines last week bought a distribution center at 555 Saint James Gate in suburban Bolingbrook for $29.5 million or about $73 per square foot. Seller TradeLane Properties had bought the 404,000 square foot facility in 2021 for $24.6 million.
The region saw an absorption rate of 1 million square feet in the second quarter, indicating leasing activity is still outpacing vacancies, according to NAI Hiffman. The region’s vacancy rate has hovered between 5.5 percent and 6.5 percent for the past year.
The NAI Hiffman Q2 2025 Industrial Market Report is available for download by clicking this link.
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, 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 management division, which provides facility management, accounting, lease administration, lender services and project services across the country. NAI Hiffman | Hiffman National is an award winning company headquartered in suburban Chicago, with more than 275 employees strategically located throughout North America.
About Hiffman National:
Hiffman National is one of the US’s largest independent commercial real estate property management firms, providing institutional and private clients exceptional customized solutions for property management, project management, property accounting, lease administration, 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 275 employees nationally and an additional six hub locations and 25 satellite offices across North America.
