Q1 2023: Chicago Industrial Market Report

The start of 2023 for industrial users in the Chicagoland area continues to be landlord favorable as vacancy continues to fall, net absorption remains positive, and rents climb to new heights. With a vacancy rate of 3.6 percent, the market is at historically low levels for users looking to expand their logistical footprints. Net absorption for the first quarter was just shy of 6.0 million square feet, marking a third consecutive quarter of decline, but still in line with the quarterly average over the past decade. Despite transaction volume slipping, users are taking 30 percent more space than they have over the past 10 years. Additionally, over 112 buildings are under construction, totaling over 39.5 million square feet of new space – most of which is being built on spec. Anticipated new product, coupled with limited options has pushed rents further into uncharted territory as NNN rents across all sizes and submarkets ended the fourth quarter at $7.23 per square foot. With many predicting that an economic downturn in 2023, investors could further look to industrial real estate as a haven to park assets, although tight lending market may make deal financial a challenge.