by Dan Rafter
Two Midwest cities made Avison Young’s recent list of the top-five industrial markets to watch in 2017. Those cities? Chicago and Memphis.
This is good news: The industrial market is already hot across the Midwest. Having two of the potentially hottest markets in the country? It’s just more evidence that as e-commerce continues to soar, the Midwest’s central location and strong transportation infrastructure continues to position the region as an industrial leader.
Look at Chicago. Avison Young reports that the city’s connection to major water, airport and highway transportation routes makes Chicago the top industrial market to watch in 2017.
And Chicago should only become a stronger industrial market in the coming years, according to the report. That’s because in recent years, Chicago struggled with a lack of Class-A, institutional-grade industrial inventory. That is changing, though. At the end of the third quarter of last year, 11.9 million square feet of new speculative and build-to-suit construction was added to the area’s industrial sector. At the same time, developers had 17.6 million square feet of industrial space here under construction.
Employment gains are a boon to the Chicago market, too. According to Avison Young’s report, the number of jobs in the Chicago region grew by 2.7 percent in 2016. That is greater than the national average of 1.9 percent.
Avison Young points to the continued big-box construction along Interstate-55 and Interstate-80 in the city’s southwest submarkets and into Lake County and Southeastern Wisconsin as good signs for the capital markets pipeline here, and more evidence that industrial activity will remain strong in Chicago in 2017 and beyond.
Chicago is also a hub of e-commerce growth. Amazon has added 6 million square feet of warehouse and distribution space in the Midwest alone in recent years, including Chicago-area buildings in Joliet, Monee and Romeoveille. New Amazon facilities are coming in Aurora and Waukegan, too.
Erik Foster, principal with Avison Young and leader of the firm’s National Industrial Capital Markets Group, said that Chicago will continue to draw investors who are looking for well-leased assets tied to the strong Midwest distrubtion network.
Memphis ranked fourth in Avison Young’s report. This isn’t surprising: As Avison Young says, Memphis is known as “America’s distribution center.”
What makes Memphis such a strong market? Start with FedEx. This compan’s global headquarters and main hub are located in the city. Thanks in part to FedEx’s presence, Memphis boasts the world’s second-busiest cargo airport. This is a positive for the industrial market here. Memphis’ industrial sector has seen significant absorption in recent years, and is in the middle of a a rise in speculative construction.
Strong employment numbers have also helped boost Memphis’ industrial market, according to Avison Young. The area’s unemployment rate is below 6 percent. The economy here is diverse, too, focusing on healthcare, biomedical research, education, transportation, distribution and logistics.
As in Chicago, expect a busy industrial market in Memphis in 2017. Avison Young reported that as the of the third quarter of 2016, Memphis had 4.15 million square feet of industrial absorption and 1.92 million square feet of space under construction. Avison Young said that the state of Tennessee is known for its pro-business attitude, another positive for the industrial market here.
The other cities on Avison Young’s list were Los Angeles, Dallas-Fort Worth and Denver.