June 2024
Warehouse Construction Slackens in Chicago Area
Following years of soaring demand for warehouse space, developers in the sprawling Chicago market have significantly slowed their pace while greatly reducing their risk.
Just over 13.4 million square feet of industrial space was under construction in greater Chicago in this year’s first quarter, far below a pandemic-era high of about 41.2 million square feet just a year earlier, according to the brokerage NAI Hiffman.
The sharp downtick comes as slowing demand, higher interest rates, elevated construction costs and other factors have led developers — along with their lenders and investors — to focus more on build-to-suit projects than speculative work in need of future tenants.
A pullback is playing out throughout the country after more than 1.5 billion square feet was completed in 2022 and 2023, according to a CoStar analysis. This was the largest two-year U.S. expansion in more than a half-century.
With the drop in sheer volume of Chicago construction comes a dramatic reduction of risk, with just over 55% of early 2024 space being built on speculation. That is down from 81% a year earlier when developers still were emboldened by a rush to add logistics space following the start of the pandemic in early 2020.
Ongoing spec projects include Logistics Property Co.’s vertical warehouse at 1237 W. Division St. near Chicago’s Goose Island, a first for Chicago, and Dermody Properties’ conversion of the 232-acre former Allstate campus in Glenview, Illinois, into a logistics campus with speculative and build-to-suit structures. Significant build-to-suit projects include Kraft Heinz’s $400 million automated distribution center in DeKalb, Illinois, almost 60 miles west of Chicago’s Loop business district.
Read the full story from CoStar.
Contact Us
Nick Schlanger
Director of Research Services
630-691-0600
nschlanger@hiffman.com
Dan Worden
Research Analyst
630-398-8932
dworden@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 recognized Top Workplace, and perennial CRE award winner, Hiffman National is headquartered in suburban Chicago, with more than 275 employees nationally and an additional four hub locations and 15 satellite offices across North America.
