by Dan Rafter
Mark Moran, executive vice president and partner with NAI Hiffman in Oakbrook Terrace, Illinois, has seen plenty of industrial markets. So he knows a strong one when he sees it. Today, he sees an exceptionally strong industrial market in the Chicago area. Moran recently spoke with Midwest Real Estate News about the reasons behind the industrial activity taking place now in Chicago.
Midwest Real Estate News: You are seeing some increased activity when it comes to industrial sales and leases in the I-88 corridor in the Chicago area. What is behind that?
Mark Moran: Up until the beginning of this year, that corridor had probably lagged the others as far as activity levels on the leasing side. On the sales side, that corridor saw transactions that were mostly investment sales-type stuff, portfolio transactions. There wasn’t that much in terms of sales to individual users. Both sales and leasing last year, then, were pretty slow. In the first quarter of this year, that has picked up significantly. I think a lot it has to do with pent-up demand. Companies had been holding off on making big decisions. At the same time, the economy has continued to improve. That has helped, too.
MREN: How busy is the I-88 corridor today on the industrial side?
Moran: We have a listing now in the Liberty Business Center in North Aurora, 300 Mitchell Road. That is a 400,000-square-foot spec building. We have been marketing that property for about six weeks so far. We have so many prospects for that property right now. We are getting a lot of interest in that property, so that tells you that there is more interest in this corridor right now. We have been busy in the I-88 corridor, busier, certainly, than we were last year.
MREN: Why has activity picked up so well in the I-88 corridor?
Moran: With many of the other nearby corridors, there is limited space available for larger industrial users. Consider the Central DuPage area. The industrial vacancy rates there are around 4 percent. If you are looking for more than 150,000 square feet of industrial space there, you have limited options. Some of the companies that might have considered moving into, say, Glendale Heights and Carol Stream, are now looking at other alternatives. As time goes on, I think we’ll see even more activity in the I-88 corridor as less space becomes available in other areas. The companies that would otherwise have located in Central DuPage or in the O’Hare market will look at I-88. They won’t go as far south as I-55, but I-88 is a viable option for them.
MREN: What makes the I-88 corridor such a good one for industrial users?
Moran: That corridor is a strong one. A lot of the companies that are looking to distribute around the metropolitan Chicago area will look at the I-88 corridor. They can’t go all the way down to Joliet or the I-80 corridor. They have to get product on a daily basis to their customer base in Chicago. There is such a dense population base in the I-88 corridor. A lot of these companies want to be located where their employees live, too. A lot of them do live in that I-88 corridor.
MREN: How about the industrial market in general in the Chicago area? How strong is it performing these days?
Moran: In general, all the major industrial corridors in and around Chicago have vacancy rates that are at historic lows. There has been a fair amount of new supply, too, but demand has been strong. The industrial corridors in the Chicago market are not being overbuilt. Developers have been disciplined enough to keep things in check. I’d say that new construction has pretty much matched up with demand. That’s why you are continuing to see growth in this area. We are continuing to see growth in industrial rental rates, too. That, too, is because industrial product hasn’t been overbuilt. It is definitely a landlord’s market right now. There are fewer concessions being offered for tenants at the same time that we are seeing rental rates increasing. That is the story in all the major submarkets here.