Chicago’s industrial market has been heating up in recent months, and it now tops the list of U.S. metro areas whose developers can expect to profit the most from new construction.
A new study by CBRE shows that Chicago developers stand to turn the highest profit from warehouse rent compared to construction costs. Chicago is on an industrial tear, with more than 9 million square feet of warehouse and manufacturing space now under construction, according to the Chicago Business Journal, citing the CBRE report.
In the top 10 markets CBRE tracked, Chicago posted the widest gap between the average rent that developers can expect to charge on new industrial construction — $4.56 per square foot — and what they would need to charge in order to break even on construction — $3.20 per square foot.
Since last year, the city jumped from 15th to ninth place on a nationwide list of most desirable industrial markets, according to Marcus & Millichap’s annual North American Investment Forecast. A major contributor, according to the report, was the global rise in e-commerce colliding with a major ongoing expansion of O’Hare International Airport’s cargo capacity. The forecast predicted average asking rents on Chicago industrial properties would reach $5.74 per square foot by the end of this year.
And the vacancy rate of Chicago-area big-box industrial properties also dropped for the first time in two years from January through March, a sign that demand isn’t letting up any time soon. [CBJ] — Alex Nitkin