Industrial N Illinois

Spec industrial projects are right as rain

Spec industrial projects are right as rain,ph1
Clarion Partners and HSA Commercial Real Estate jointly completed the largest development last quarter, a 757,880-square-foot speculative facility located in Shorewood’s Heartland Corporate Center.

Chicago just experienced its wettest May on record. But the inclement weather has done little to dampen the metro’s hot spec industrial development streak.

There were 50 industrial projects totaling 17 million square feet under construction as of Q2 2019, according to a new research update from Colliers International. More than half of that space, 9.1 million square feet, was speculative.

Last quarter also witnessed 4.7 million square feet of delivered space—the most in a single quarter since Q4 2017. There was an equal amount of new starts last quarter, despite the many weather delays (May alone had 21 days with measurable rainfall).

Weather-related delays weren’t the only challenge last quarter. Some precast manufacturers have fallen behind, pushing back the delivery schedule on many projects to the third quarter of 2019, as well as the start date of many anticipated projects.

About 7 million square feet of vacant speculative product is expected to deliver during the third quarter of 2019, likely causing a temporary rise to the market’s vacancy rate. More than 12 million square feet of new construction is expected to start during the second half of 2019—virtually all of it, close to 11 million square feet, being built on spec.The I-55 corridor, O’Hare, Chicago South and Elgin I-90 submarkets are the areas where the most space is about to begin construction.

Since 2013, there have been 227 speculative projects delivered to the Chicago market, totaling 61 million square feet. Despite this development activity, occupancy continues to grow in recently-completed spec projects.

As of the end of the second quarter of 2019, more than 68 percent of this space has been leased. This figure has increased each of the past eight quarters, suggesting that the market is not being overbuilt with demand for new spec warehouse space outpacing new supply.

The largest construction start of last quarter was a 1.5-million-square-foot build-to-suit facility for liquor distributor Diageo North America. Seefried Industrial Properties is developing the property near the intersection of Steiner Road and 143rd Street in Plainfield, Illinois. Precast and steel work on the site, which is also the largest building now under construction was complete on at least half the building at the end of June 2019.

The largest construction completion of last quarter was a 757,880-square-foot speculative facility developed by a joint venture between Clarion Partners and HSA Commercial Real Estate. Located in Shorewood’s Heartland Corporate Center, the property features 36-foot clear heights, 108 exterior docks and parking for 189 trailers and 240 vehicles.