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Leasing in New Spec Expands, Undeterred by Uncertainty
Chicago Industrial Construction Review | Third Quarter 2020

 

Record New Construction Starts, Though Largely Build-to-Suit
Total quarterly construction starts by type (speculative vs. build-to-suit)

  • Despite the evolving Coronavirus pandemic and an economic recession, new construction starts set a record during the second quarter of 2020, with 15 new projects starting construction totaling a whopping 12.8 million square feet.
  • This activity was highlighted by five buildings greater than one million square feet newly underway, three of which are build-to-suit projects for e-commerce giant Amazon.com.
  • These construction starts bring the total under construction to 27.2 million square feet, the most space being built at one time in the history of Chicago's industrial market.
  • 70 percent of the product under construction are build-to-suit projects, compared to 30 percent being built on a speculative basis, flipping the script from the past several years when speculative development dominated the construction pipeline.

 

Despite Uncertainty, New Spec Construction Continues to Lease
Total spec delivered since 2013, quarterly spec deliveries, and spec vacancy rate

  • Another 13 speculative projects were completed during the second quarter of 2020, bringing the total speculative space delivered during the current development cycle (since 2013) to 76.2 million square feet among 289 buildings.
  • Despite this massive increase in speculative construction, especially since 2016, demand for modern industrial space has outpaced the rate of development for the past several years.
  • Significant new leasing activity in modern speculative product has pushed the vacancy rate in buildings built since 2013 down every quarter since the beginning of 2017. At the end of the second quarter of 2020, those buildings were 74 percent leased.
  • During the second quarter of 2020, the Coronavirus pandemic took hold, resulting in entire states shutting down economies and major supply chain disruptions. Despite overall uncertainty about life as we know it, 12 new leases totaling 2.6 million square feet were signed in new speculative product, pushing vacancy in speculative buildings delivered since 2013 down to 25.6 percent, the lowest it has been during the current cycle.

 

Recent Spec Leasing Well in Many Submarkets
Total spec development since 2013 by submarket and percent leased

  • On average, speculative construction projects delivered since 2013 are 74 leased. However, many submarkets that have seen significant speculative development are better leased.
  • The I-55 Corridor and I-80/Joliet Corridor submarkets together account for 32.8 million square feet, or nearly half, of the speculative development since 2013 and are 80 percent and 78 percent leased, respectively.
  • Other submarkets are performing even better, such as Lake County, where 87 percent of the current cycle's spec product has leased, the Central DuPage submarket at 86 percent leased, and the I-290 North submarket, at 85 percent leased.

 

Spec Development During the Current Cycle
Speculative construction projects since 2013 by leasing status

Click here or on the map above to view an interactive aerial of every speculative development project completed since 2013 and currently under construction.

Q2 2020 Largest Construction Start
A new trend in Chicago's industrial market, the first modern multi-story industrial distribution facilities are now under construction in south suburban Markham and Matteson. Each building will be occupied by Amazon.com upon completion and will be five stories tall and total about 3.8 million square feet.

Q2 2020 Largest Building Under Construction
The multi-story Amazon.com facilities are not only the largest buildings under construction, but the largest modern industrial buildings the market has historically seen developed.

Q2 2020 Largest Construction Completion
A 993,460-square-foot LCD fabrication facility was completed in Mount Pleasant, Wisconsin, part of the sprawling FoxConn project being built on more than 4 square miles of land.


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