Q3 2022 Chicago Industrial Report
Industrial Market Trends Q3 2022
Chicago’s industrial market recorded a strong third quarter, with rental rates jumping an unprecedented 13 percent and the vacancy rate reaching a new low of 4.54% (and even lower in O’Hare and other submarkets).
Among the key industrial market trends to watch are:
- Interest rates — Industrial fundamentals remain strong, but rising interest rates are impacting capital costs and slowing development and investment
- Limited supply/strong demand — A lack of supply across the Chicago market is still impacting space decisions. Tenants should be prepared with financing in hand and be ready to commit quickly.
- Rental rates — Will continue to climb in the near term due to the lack of supply and other factors. Vacancy rates — Will edge up in 2023 due to 30 msf of new space hitting the market
- New construction — Continues to be slow due to material shortages and higher costs. This is one industrial market trend to watch as developers look to add supply to meed ongoing demand.
Chicago Industrial Market Overview
The limited availability of industrial space, particularly in the O’Hare and DuPage County submarkets, continues to impact tenants looking to expand or establish new operations in the market. In some submarkets, the lack of supply is keeping absorption lower than tenant demand would support.
Tenants are often renewing leases to remain in existing facilities, as options are limited. The overall Chicago industrial market had 6.9 million square feet (msf) of net absorption in the third quarter of 2022, bringing the total to 37 msf for the first three quarters of 2022. There was 2.6 msf of absorption in the Central Kane/DuPage submarket, 2.3 msf in the North Kane/I-90 submarket and 1.4 msf in the O’Hare submarket. Market fundamentals remain strong, despite rising interest rates that are creating some pull back as higher financing costs weigh on developers and investors.
For more information, contact Dan Brown.
