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Industrial Development Set Records in 2020, New Spec Continued to Perform
Chicago Industrial Construction Review | Year-End 2020

 

The Chaos of 2020 Hasn’t Slowed Leasing in New Spec
Total spec delivered since 2013, quarterly spec deliveries, and spec vacancy rate

  • 2020 witnessed the delivery of 58 speculative construction projects totaling 12.3 million square feet, a 19 percent decrease compared to the 15.1 million square feet of speculative product delivered in 2019.
  • Since the current development cycle began in 2013, 317 speculative projects have been delivered totaling 82.2 million square feet.
  • This new speculative space has performed well. To date, 79 percent of the speculative product completed since 2013 has leased. One year ago, that figure was 71 percent. The occupancy rate in new spec has increased every quarter for the past three-and-a-half years despite significant new speculative development every quarter.
  • The climbing occupancy rate demonstrates that demand for new construction has continued to outpace the rate of new development, even during a global pandemic and a turbulent economy.

 

New Leases in Recent Spec Outpaced Deliveries in 2020
Total spec delivered and new leasing in spec completed since 2013 by quarter

  • 88 new leases totaling 14.7 million square feet were signed in 2020 in speculative buildings that were delivered since 2013. This represented a 6.4 percent increase over the 13.8 million square feet recorded in 2019, despite the uncertainty introduced by the events of 2020.
  • During the fourth quarter of 2020 alone, new leasing activity in recently-completed speculative product totaled 3.6 million square feet, double the 1.8 million square feet of new speculative space delivered during the quarter.
  • Amazon played a significant role in new speculative leasing during 2020, signing 12 leases totaling 4.5 million square feet in recently-completed speculative buildings. Amazon, a single user, represented more than 30 percent of the new leases signed in recent speculative product during 2020.

 

Dip in Speculative Development May Tighten Lease-Up Time
Total spec development since 2013 by submarket and percent leased

  • While 2020 witnessed a record 35.7 million square feet of construction starts, only 11 million square feet of that space is being built on a speculative basis, compared to 12.8 million square feet of speculative construction starts in 2019 and a record 17 million square feet in 2018.
  • An all-time record of 29.6 million square feet is currently under construction, although only 9.2 million square feet, or 31 percent, of that space is speculative development. This flips the script from even one year ago, when speculative development accounted for 67 percent of the total space under construction.
  • On average, speculative buildings delivered between 2013 and 2018 are now 93 percent leased, while buildings delivered in 2019 and 2020 are only 51 percent leased. This suggests the average lease-up time for speculative developments in the Chicago market falls between 12 and 30 months.
  • The current temporary dip in speculative development may help shorten the lease-up window for new speculative product, as demand for modern space is expected to remain strong.

 

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.

Q4 2020 Largest Construction Start
A 1,290,460-square-foot build-to-suit facility began construction on the final land site in Venture One Real Estate’s Crossroads 55 business park in Channahon.

Q4 2020 Largest Building Under Construction
Construction continues on two five-story build-to-suit facilities for e-commerce giant Amazon in south suburban Markham and Matteson. Each building will total 3.8 million square feet, the largest modern industrial buildings the market has seen developed.

Q4 2020 Largest Construction Completion
Two Amazon build-to-suit projects greater than 1 million square feet were delivered during the fourth quarter of 2020, one developed by Seefried Industrial Properties in Beloit, Wisconsin, and the other developed by Venture One Real Estate in Channahon’s Crossroads 55 business park.


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