Industrial Developers Set New Construction Record At Year's End
Industrial developers in the Chicago region set another record in Q4 for the amount of new space under construction. By the end of 2020, builders had 29.6M SF underway, the most ever, eclipsing the 27.3M SF underway in Q3, according to a Colliers International market report.
Most of this new product consists of build-to-suits, and that’s a big switch for the Chicago area. In 2019, developers finished 23.1M SF, including 15.1M SF of speculative product, a record amount of spec since the current development cycle began in 2013. And in 2020, 12.3M SF of the more than 23M SF completed was for spec projects. But of the projects now under construction, only 31% of the space is speculative.
The COVID-19 crisis helped force that change, as consumers sought ways to avoid crowded retail centers.
“We’re seeing companies re-engineer their supply chain, and a lot of that is due to the greater use of online shopping, particularly groceries,” Colliers International principal David Bercu told Bisnow.
The big story in Chicago’s industrial sector used to be a shortage of willing users for the region’s largest distribution centers, he added. But the pandemic did away with that worry.
“In the blink of an eye, there were several large transactions completed, and now Chicago is tight when it comes to big-box space,” Bercu said.
Colliers considers buildings to be big-boxes if they are larger than 200K SF, have ceiling heights of 28-foot clear or higher and are of precast construction. Distributors leased more than 4M SF of big-box logistics and warehouse space in Q3, according to the firm.
Developers started a total of 65 new projects of all sizes in 2020, totaling more than 35M SF, a 76% jump over the previous year. Bercu attributes the increase to the construction of bigger buildings.
Amazon led the way for industrial demand in 2020 and will continue doing so in the coming year. Seefried Industrial Properties delivered in Q4 a build-to-suit project of more than 1M SF for Amazon in Beloit, Wisconsin. Venture One Real Estate did likewise for Amazon in Channahon’s Crossroads 55 business park. Construction also continues on two five-story build-to-suit facilities for the e-commerce giant in south suburban Markham and Matteson. Each building will total 3.8M SF, the largest modern industrial buildings ever developed in the Chicago region.
“One of the few positive things that came out of COVID was the resurgence of the industrial market, particularly in Chicago, and Amazon is at the forefront of it,” Bercu said.
