HEADWINDS REPLACE TAILWINDS IN CHICAGO’S INDUSTRIAL SECTOR INDUSTRIAL from page 1 beginning of 2020, 49 projects total-ing 10.8 million square feet were be-ing built on a speculative basis,” says Regnery. This accounts for 67 percent of the total square footage. But before the coronavirus outbreak became a national crisis, there hadn’t been signs of the Chicago industrial market becoming overbuilt, accord-ing to Regnery. The vacancy rate for speculative product decreased each of the past 11 quarters, meaning demand for new speculative space was outpac-ing new supply. “Lake County is tapped out.” In Bristol, Wisconsin, near I-94 and the Illinois-Wisconsin border, HSA is developing Bristol Highlands Com-merce Center, a three-building in-dustrial business park that will total more than 1 million square feet upon completion. The rst two speculative buildings are slated for delivery later this year. Thompson says his team is chasing more sites around the area due to its accessibility and proximity to highways. Nick Siegel, senior vice president with Chicago-based Bridge Devel-opment Partners LLC, says that it is harder than ever to nd new land sites and available Class A buildings for in-dustrial use. “We still see a situation where tenants do not have a lot of op-tions to choose from.” For Bridge, everything the devel-oper builds is on a speculative ba-sis. But a lot of the buildings end up being leased before construction is completed, according to Siegel. “You could call it ‘spec-to-suit,’ where a tenant comes along early in the pro-cess and wants to make some minor modi cations to our planned build-ing,” he explains. Developers move north The other storyline taking shape in the market is that more and more Chicago-based industrial developers are expanding into Southeast Wiscon-sin. While property taxes on commer-cial real estate are lower in the Badger State than in Illinois, land availability is the real reason, according to Tim Thompson, executive vice president and managing director of industrial brokerage with Chicago-based HSA Commercial Real Estate. “Southeast Wisconsin is becom-ing hot because there’s no land left in northern Illinois,” says Thompson. HSA Commercial Real Estate is developing Bristol Highlands Commerce Center, a three-building industrial park in Bristol, Wisconsin, near the Illinois border. REAL ESTATE AUCTION APRIL 29, 2020 IDEAL OR FOR A USER INVESTOR LARGE POTENTIAL UPSIDE The goal is to design a divisible and exible building that can accommo-date a tenant of any size range, says Siegel. Since its inception in 2000, Bridge has acquired and developed more than 42 million square feet of industrial buildings. In addition to Chicago, the rm focuses on the markets of Miami, New Jersey/New York, Los Angeles/San Francisco and Seattle. Today, Siegel says he comes across many tenants looking for space be-tween 30,000 and 100,000 square feet. In suburban Chicago’s Downers Grove, Bridge leased a project to sev-eral tenants who averaged leases of 25,000 square feet each. The tenants cover a wide range of industries, from food and beverage to pharmaceutical, according to Siegel. Landlords brace for change Poplar Creek Office Plaza 1721 Moon Lake Blvd., Hoffman Estates, IL (On Higgins Road just 1/2 miles from I-90) Five-story, 135,032 sq.ft. tower currently just 18,000 sq.ft. occupied, in very good condition, situated on 7.4 acres. Huge parking lot and well landscaped. (14.5 additional adjacent acres for future residential/mixed use commercial development oered separately). Located across from the Amita Health/Alexian Brothers campus and a short drive to Barrington, Woodfield Mall and O’Hare Airport. REPLACEMENT VALUE WELL ABOVE $25,000,000 To be sold to the highest bidder subject to a minimum bid of $4,635,000* (*plus a 5% buyers premium) ON-SITE INSPECTIONS NOON-2PM • APRIL 7, 16, 22 FOR INFORMATION CONTACT Rick Levin & Associates, Inc. 312.440.2000 • www.ricklevin.com 16 • April 2020 • Heartland Real Estate Business Westmount’s Booth says that there is healthy demand for multi-tenant buildings with smaller spaces under 30,000 square feet. Westmount main-tains an of ce in Chicago along with a portfolio of 5.1 million square feet of multi-tenant warehouse and light in-dustrial space spanning 48 buildings across metro Chicago. The rm also owns 1.7 million square feet of industrial space in the metro Milwaukee market. As a value-add company, Westmount looks for Class B properties with strong loading capabilities and good accessibility, ac-cording to Booth. “We have experienced favorable rent trends from the landlord’s per-spective during the past few years,” says Booth. “The current nancial conditions could bring this to a halt, so we are assessing it on a case-by-case basis.” From its peak on Feb. 19 through March 31, the Dow Jones Industrial Average fell 25.3 percent. Before the worldwide pandemic, national asking rents for industrial product were expected to increase by 6.8 percent and reach a new high of $6.95 per square foot by year-end 2021, according to Cushman & Wake-eld. In Chicago’s in ll markets, rents had grown at an average of 3 percent year-over-year, while rents in green eld markets such as the I-80 Joliet Corridor grew at a bit slower pace of 2.2 percent since 2013, says Regnery. Sources agree that O’Hare is still the hottest submarket in Chicagoland due to its proximity to the airport, but strong leasing activity has recently occurred in the I-55 corridor, I-80 cor-ridor, Central DuPage and Southeast Wisconsin submarkets. It’s more than just e-commerce that is fueling demand for industrial facili-ties. All types of logistics companies are taking space. Of the 17 million square feet of industrial space that the metro Chicago market absorbed last year, 16.5 million square feet was logistics-related, according to Thomp-son of HSA. “Chicago’s a unique market because of its rail service, central location and population,” he says. The coronavirus situation is too u-id to know the impact on the Chicago industrial market for the rest of the year, says Thompson. But he believes there may be more demand for ware-housing since consumers are stocking up on essential goods and deliveries will likely be delayed. “I’ve never seen anything like [the coronavirus situation] in my life,” he says. “It changes daily.” ■ www.REBusinessOnline.com
Heartland Real Estate Business April 2020: Page 16
