In response to the weakened economy over the last several years, speculative construction in the I-55 corridor had dropped dramatically, and for the last four quarters there were no new construction deliveries.
However, in recent months that has all changed. DCT has announced a 604,000 square foot speculative distribution center located near the I-55 and Weber Road Interchange. In addition, ML Partners recently announced a 121,800 square foot speculative distribution center at I-355 and 143rd Street in Lockport, IL, which will be divisible to 17,400 square feet. In Park 355, a development by H.S.A., construction will commence this fall on Phase II, a 180,000 square foot distribution center divisible to 17,500 square feet.
Clarius Partners has started construction on a 1 million square foot facility on Youngs Road in Joliet. In addition, Clarius Partners is doing site work for a 454,000 square foot facility in Morris, IL. Both of these projects will serve large users that range from 200,000 s.f. and up. In total there is approximately 2.3 million square feet of new speculative construction that has commenced, or will be starting construction this year. All of these projects address an area of the market that is underserved, a lack of Class A space serving users over 500,000 square feet, and under 50,000 square feet.
Upon completing an in-depth analysis of the I-55 corridor sub market, which includes facilities in Bolingbrook, Romeoville, Woodridge and Lemont, IL, I have the following to report.
Focusing solely on Class A & B industrial product, there is approximately 60 million square feet with a vacancy rate of 13.4%. The interesting thing about this market is that over half is owned by investors that own more than one facility, and some of these investors own ten or more facilities within the I-55 corridor. The average size of a building in the Chicago industrial real estate market is 233,000 square feet, which is one of the reasons that the I-55 corridor is the most attractive sub market for firms pursuing state-of-the-art distribution centers.
Another key advantage of the I-55 corridor is its proximity to four intermodal centers; all located within minutes of I-55, thereby reducing drayage costs for companies using intermodal transportation.
I expect to see demand for space in the I-55 corridor to continue to be strong. When analyzing rollover risk for the Chicago industrial market (the number of tenants with leases expiring within a given year), we see that in 2013 there will be approximately 22 million square feet (or approximately 2% of the entire Chicago industrial market) of space that will have leases expiring. In 2014, there will be approximately 20 million square feet of space that will have leases expiring, and in 2015 there will be approximately 16 million square feet of space with leases expiring. Some of these tenants will renew, but many firms (particularly distribution users) will be looking for better, more efficient options in the market. If the economy continues to improve, we expect these users size requirements continue to improve.
If you have any questions about the Chicago industrial real estate market, or the I-55 corridor submarket, please contact me.