Chicago’s industrial real estate market is poised to see further gains as industries affected by pandemic-induced global supply chain disruptions turn their attention to the U.S. heartland.
A record 220,000 jobs are projected this year, led by the electric vehicle battery, computer and electronics industries, from foreign direct investment, advanced manufacturing companies expanding domestically and offshoring companies bringing back production facilities to the country, according to Newmark’s industrial report. The figure is a 16 percent increase from a record set four years ago, when 188,970 new jobs were created.
The majority of vehicle battery production, semiconductor and chip manufacturing were localized in Asia, which caused freight cost increases and shipping delays that prompted the move, the report said. Some firms doing business in the U.S. may also increase offshoring to nearby countries such as Mexico to develop a more resilient domestic supply chain at a more affordable price.
The growth in Chicago’s industrial market has so far come mainly from the increased need for last-mile warehouses, but now is set to benefit as the pandemic causes most industries to shift to a supply chain model that requires moving raw materials and goods across the country.
“This will result in the need for highly efficient manufacturing and distribution facilities that cut lead times, reduce transportation costs and deliver products to consumers as quickly as possible, all of which should positively impact the metro Chicago region for many years,” said Adam Marshall, senior managing director of Newmark’s Chicago office.
Access to expressways, rail, shipping and air cargo make Chicago uniquely positioned to supply chain efficiency and the city can absorb job growth, which has one of the largest manufacturing hubs with a highly skilled labor force, Marshall said.
Chicago’s O’Hare International Airport processes more than 2 million metric tons worth over $200 billion a year, ranking it number one by freight value of all airports in the country. The city is the only place in the country where all seven Class 1 railroads intersect.
While the pandemic battered the city’s office buildings, the already strong industrial market has thrived. Demand for big-box warehouse space pushed vacancy rates to an all time low of 4.4 percent in the third quarter, while around 27.8 million square feet are in the pipeline — more than twice the warehouse space built this year.
The city’s industrial real estate sales totaled $1.5 billion in the first half of the year, on track to blow past last year’s $2.1 billion in sales. Chicago also recorded the most sales of any individual market with 150 transactions in the first half of the year.