by Dan Rafter
Business boomed last year at the CenterPoint Intermodal Center in the Chicago suburbs. Brian McKiernan, senior vice president with CenterPoint, said that the intermodal center, located in the Joliet market just 40 miles southwest of Chicago, was the home to nine big industrial transactions last year, transactions that involved more than 3 million square feet.
“Last year was our best year at the intermodal center,” McKiernan said. “We probably had about $300 million of investment at the center.”
And CenterPoint’s experience isn’t overly unusual. The suburbs of Chicago continue to attract industrial users, thanks in part of the area’s central location. The rebounding local economy helps, too.
The best news? McKiernan said that he expects another big year in 2016, both for the CenterPoint Intermodal Center and the suburban Chicago industrial market in general.
“The market was incredibly strong last year,” McKiernan said. “And this year is getting off to a strong start, too. There is no indication that the industrial market is going to slow down in the suburbs this year.”
A changing industry
McKiernan points to several reasons for the strong industrial market here. First, the United States is in the middle of an economic recovery. That is providing a boost to all commercial real estate sectors, including industrial. The economic improvement is also inspiring several industrial users to make strategic moves that they had been holding off on during the country’s recessionary years. Many of these users are looking now for new, modern industrial space.
At the same time, the rise of online shopping is providing another boost to the industrial market. Amazon grabs the headline, and is well-known for grabbing large chunks of industrial space across the country. But other companies are boosting their ecommerce abilities, too. And these users need new distribution facilities so that they can quickly ship products to customers across the country.
“The Amazons, Walmarts and Targets of the world are selling a lot of products,” McKiernan said. “They need a place to sell it from and a store it.”
During the 14th annual Commercial Real Estate Forecast held by Illinois Real Estate Journal, Chicago Industrial Properties and Midwest Real Estate News in January, Anthony Pricco, principal and partner with Bridge Development, said that technology — and specifically Amazon — has changed the expectations of industrial users.
Today, tenants are increasingly seeking 32-foot clear heights, a change from just five years ago when 24-foot clear heights were the norm in industrial facilities. Tenants are also focused more than ever on automation, following, perhaps, the lead of Amazon, Pricco told the full-house crowd at this morning’s conference.
“Go to an Amazon building and you’ll see a three-story building in which everything is fully automated,” Pricco said. “And the Amazon formula is constantly changing. They are always tinkering with their models.”
Why the suburbs are strong
McKiernan said that there are plenty of reasons why the Chicago suburbs remain such a popular choice among industrial users.
The location of the suburbs is one big draw, he said. The Chicago market is located in the center of the country, and allows users to reach a large majority of the country reasonably quickly. The south suburbs are also served by a strong network of highway and rail arteries, McKiernan said.
When users do set up industrial bases in the south suburbs, they are looking for certain amenities, McKiernan said. They want more parking than ever. They want taller clear heights. Many users have additional power requirements. And all are seeking modern facilities that will help them attract the strongest possible workforce.
But the most importance factor remains location, McKiernan said.
“Users are looking to be more efficient with their supply chains,” he said. “I don’t think that’s going to change any time soon. Companies today are very logistics-focused. The big manufacturers are looking for ways to make consumer products cheaper. That is harder and harder to do. One way you can cut costs is to have a more efficient supply chain. Logistics is a continuing focus for the Walmarts and Targets of the world.”