The country’s hottest industrial real estate market got hotter in the first quarter of 2022, fueled in part by eye-popping data from one of its submarkets. Chicago’s first-quarter industrial vacancy rate fell to 4.9%, the lowest vacancy rate ever recorded in the market, according to a report published Tuesday by real estate advisory Colliers International Group Inc.
Chicago’s vacancy rate dropped 53 basis points just from the fourth quarter and fell nearly 175 basis points from a year ago.
Net absorption — the amount of space occupied in a given period minus the amount of vacated space — stood at 11.7 million square feet, well above the 7.1 million-square-foot net absorption figure in the first quarter of 2021 and on pace to match the 44.9 million-square-foot total for all of 2021, Colliers said. Net absorption totaled nearly 50 million square feet over the past four quarters, the highest such tally over a 12-month period in the market’s history.
About 16.5 million square feet of new leases were signed last quarter, the second-largest quarterly total behind the fourth quarter of last year, Colliers (NASDAQ: CIGI). said. The average asking rental rate stood at $5.17 per square feet, 8 cents per square foot higher than in the fourth quarter.
Of the 22 submarkets comprising the greater Chicago industrial area, five hit record-low vacancy rates in the quarter, according to Colliers data. But nowhere was the surge more powerful than in the I-55 corridor, a 45-mile stretch that connects the city with Joliet to the southwest. About 4 million square feet were leased in the quarter, pushing the corridor’s vacancy rate to 1.73%. A year ago, the corridor’s vacancy rate stood at 11.4%.
Craig Hurvitz, Collier’s Chicago-based vice president of market research, said that eight projects totaling 2.4 million square feet were under construction along the I-55 corridor as of the end of March. Six of those were speculative developments, meaning they are being built without a confirmed tenant. “There are plenty more planned projects in the pipeline,” he said in an email.
Data published last week by real estate advisory CBRE Group Inc. (NYSE: CBRE) showed even less room at the Chicago industrial inn. Vacancy rates at the end of the first quarter stood at 2.3%, while the availability rate, which combines vacant space with space that’s occupied but is currently available to lease, stood at 3.9%. Chicago was the leader in net absorption with 10.6 million square feet, CBRE said.
Colliers and CBRE may use different methodologies, which could account for the discrepancy in data, according to Mark Thoman, a CBRE spokesman.
The only seeming constraint to Chicago’s continued industrial growth is access to available land. Chicago ranked ninth at the end of the quarter in the amount of square feet under construction with 20.5 million square feet, according to CBRE data. The Dallas/Fort Worth market was far and away the leader with 57.4 million square feet under construction at the end of the quarter. California’s Inland Empire east of Los Angeles was second with slightly more than 34 million square feet under construction.