Chicago Leads Nation's Industrial Market Despite Dips In Sales, Leasing
Despite challenging national economic circumstances and decreases in sales volume and leasing activity, Chicago still led the country in industrial real estate transactions in 2022, according to a new report from NAI Hiffman.
Even with a 13.8% decrease in annual sales volume compared to 2021, Chicago industrial saw 6.4M SF of positive net absorption in Q4 2022 and a nation-best total of 38.3M SF for the year. Meanwhile, vacancy decreased to 4.1% over the course of 2022, during which 26.6M SF of new industrial space delivered.
“The large economic pressures definitely had an influence on all markets in the country, but I think that a lot of factors positioned Chicago to overcome the challenges that are within control,” NAI Hiffman Director of Research Nick Schlanger said. “I just think our transportation infrastructure and the growth of large industrial tenants in the market is a big advantage and something that will continue the momentum regardless of outside economic pressures in 2023.”
New leasing activity for Q4 2022 was 9.4M SF, down 21% quarter-over-quarter and 60% year-over-year.
“Although demand remains high, we just aren't seeing a lot of available product,” Schlanger said. “Leasing activity absorption is threatened by the availability in the market, and right now, there's just not that much available.”
Schlanger predicted leasing activity will pick up in the first half of 2023, with 30M SF of the 34.8M SF under construction in the Chicago area set to deliver this year.
Developers remain confident enough that their space will be leased quickly to break ground without having tenants lined up.
“Once the construction gets a little further along, I think we will definitely see large industrial tenants scoop that up and leasing activity will accelerate,” Schlanger said.
Chicago’s status as a transportation hub, with access to rail lines and ports, positions it to weather a storm better than other cities, Schlanger said.
“Taking into consideration everything, I think Chicago's probably the highest-performing market in the country in 2022," he said. "Chicago was the solution to some of the supply chain issues that we have now that constrained other markets."
