Industrial N Illinois

New infrastructure to open O’Hare submarket

  
New infrastructure to open O'Hare submarket,ph01

The O’Hare market is known for being tight and expensive, but NAI Hiffman’s Brian Colson said that he expects this to change in the coming year thanks to a new project by the Illinois Tollway. That project has the goal of making infrastructure more efficient, and could have a significant impact on the O’Hare submarket.

“Right now, they’re reconfiguring the entire airport and access to the airport. The infrastructure around O’Hare is changing, which would open up the entire far west side of the market,” said Colson.

The Illinois Tollway’s Elgin O’Hare Western Access project began in 2013 with the goal of creating new access to the west side of O’Hare International Airport. Construction projects will continue through 2020, and include a new ramp with western access to O’Hare via York Road, a new partial interchange on I-294 at North Avenue and improvements to Touhy Avenue.

The $3.4 billion project will create 17 miles of new roads with 15 new or improved interchanges that are part of an all-electronic toll road. Plans also include improving and widening Illinois Route 390 and extending it east along Thorndale Avenue to O’Hare. Plans also call for a new roadway that will wrap around the western border of O’Hare and link I-90 and I-294.

Colson and several other industry experts believe that when this project is completed it will open up land that was previously less desirable. The north side of Franklin Park is one of those areas and some significant deals right now are happening within that space.

Colson and Pritzker Realty Group have a project at 11333 Addison Ave. in Franklin Park with 194,260 square feet of space available on 10.24 acres. One of the biggest projects to note is Bridge Development Partners’ acquisition of a 48-acre site at 10601 Franklin Ave. in Franklin Park for $27 million. Three buildings on that site will be delivered later in 2018.

In the third quarter, Bridge completed two spec buildings at 9555 Soreng Ave. and 9655 Soreng Ave. in Schiller Park. One speculative construction project is underway by Clarius Partners at 9300 King Avenue in Franklin Park that will be delivered before the end of 2017. More projects are in the pipeline, and demand for the area is expected to remain strong because of its proximity to O’Hare and updates to its surrounding infrastructure.

“Opportunities for land redevelopment were not as attractive before the Illinois Tollway plan. The whole pocket had poor access, and that’s improving in 2019 and will open up once not-so-desirable areas,” said Colson.

The markets surrounding O’Hare are typically industrial-focused, but there are office and retail sprinkled throughout. Colson believes that the office and few retail spaces in the O’Hare market will soon disappear. The only reason they were built was to accommodate industrial users who didn’t have the ability to expand their office on their primary location, Colson said. The office market is competitive, and when users look for space they often want Class-A buildings with lots of amenities, and O’Hare doesn’t offer that. Users looking for this type of space go to Rosemont if they need to be close to O’Hare, he said.

“Any sort of office lingering around is quickly becoming obsolete. The existing office space doesn’t offer anything tenants demand. Pure office in O’Hare? It’s dead,” he said.

The office space that’s available in the O’Hare market is small and really only ideal for niche tenants. The options for large space dwindle with only four properties that can accommodate users above 100,000 square feet, according to Colliers International. And only three of those are Class-A.

The little activity that O’Hare does see is a result of its convenient access to highways and the airport. It is one of the smallest suburban office markets and is likely to remain that way, even with the addition and improvements being made as part of the Illinois Tollway’s access project.

Looking ahead, Colson isn’t concerned with too much when it comes to the O’Hare market. Workforce, which is typically a challenge in most sectors, doesn’t worry him, while demand should remain strong, too.

“The only real challenge I see is taxes doubling for some owners. Work force is still fine, just humming along. I do feel there will be a lot of space at some point next year, but that is part of balancing out,” he said.