Central Kane/DuPage County industrial update
January 8, 2024 — Looking to buy or lease industrial space in the Central Kane/DuPage County submarket? Here’s a look at 2023 activity and what’s ahead for this popular industrial location, which attracts many logistics companies and manufacturing businesses.
The Central Kane/DuPage County submarket is one of the larger industrial submarkets in the Chicago region and continues to attract local, national and global manufacturing and logistics companies. A review of recent activity shows that logistics facilities account for nearly 50 million square feet, the largest proportion of local industrial supply. Other industrial uses include specialized space (15.2 msf) and flex space (2.7 msf). Among the large occupiers are consumer goods manufacturer 3M, which occupies 2.5 million square feet (msf), and tire manufacturer Goodyear, with 1 msf. The submarket is an ideal location for many small to mid-sized industrial businesses as well, given its strong transportation infrastructure, favorable tax rates, access to solid labor pools and other benefits.
Industrial rents grow
Annualized rent growth in the first half of 2023 was around 6.6%, on pace with the rest of the Chicago market, and then increased to 8% during the second half of the year, according to CoStar research. Though not the submarket’s highest level of rent growth, it is outpacing its 7.3% annualized average rent growth over the past three years and is higher than the area’s 10-year average of 5%.
The boost in rents is coming from logistics properties, which are recording rental growth gains of 7.5%. Flex and specialized rents are increasing at slower rates, at 6.1% and 4.3%, respectively. Many tenants are experiencing escalation bumps, but those have settled down from the highs of 4% to the overall Chicago market’s standard of 3%.
Industrial development update
Industrial developers have added nearly 5 million square feet (msf) of space to the Central Kane/DuPage County submarket over the past three years. With another 1.8 msf under construction and/or recently delivered, tenants have more options for logistics, specialty and flex space. With all this new inventory, it isn’t surprising that this industrial submarket is registering an availability rate 100 basis points higher than its market norms. Yet vacancy is still registering a 3.2% rate, near the 10-year lowest recorded level.
As the Chicago industrial market (and others across the country) recalibrates after the robust activity seen during and immediately after the pandemic, there are headwinds to watch. The wave of industrial deliveries without tenants in place is causing vacancy rates to increase. Industrial space is leasing at a much slower pace across the Chicago market than was seen in 2022. Yet, unlike other areas, some larger deals were inked during 2023’s latter half. These larger transactions involve sizable renewals and new deals involving logistics and packaging firms. While demand is tapering off, activity is expected to moderate and not fall significantly. This is good news for companies looking to lease industrial space coming out of such a strong demand and low supply environment.
Looking to buy industrial property in DuPage County?
Contact Mike Antonelli or Matt Hanson for details on the 250 N. Schmale Rd., Carol Stream, IL building shown above.
