Chicago's Industrial Dealmakers Anticipate Q1 Boom With Election In Rearview Mirror

Donald Trump’s election to a second presidential term may make the Chicago industrial market red-hot again — if only because a year marked by an uncertain political path forward finally has clarity. 

Panelists at Bisnow’s Chicago Industrial Summit Tuesday expressed cautious optimism that deals will flow in the first quarter as tenants with pent-up demand finally make their move in the marketplace.

While industry professionals at the event, held at Matte57, were split on how a new presidential administration would impact costs, they agreed that the finalized election results would improve clarity for decision-makers moving forward. 

“We've checked the box. The election is over,” said Kyle Schott, vice president of real estate development at Ryan Cos. “That allows capital to forecast a little bit better what the next four years are going to look like.” 

Over the last two years, a lot of developers, investors and end users have held back on spending money because they were waiting until market conditions improved, Schott said. But users of industrial space still want to grow and capital sources still need to deploy funds, so getting past the election will allow tight market conditions to loosen “responsibly,” he said. 

Elections aren’t as consequential for some developers because of the longer time horizons they have on deals, The Missner Group CEO Barry Missner said. 

But he added that the company has seen traffic “noticeably pick up” in some of its vacant spaces since the election. 

While the Biden administration invested in green energy policies, like more than $2.7B in almost 10,000 renewable energy and energy-efficiency improvements, the Trump administration has signaled it will make an abrupt about-face. The president-elect is looking to once again withdraw the U.S. from the Paris Climate Agreement, allow drillers into Alaska’s wildlife reserves and unleash fossil fuels, the Financial Times reported.

The changes in energy policy could have a positive impact on development, CenterPoint Senior Vice President Brian McKiernan said. The Environmental Protection Agency may be a little bit “less focused” on some of the issues that were previously a top priority, and that could be good for local development. 

“California could take a more extreme view than other places,” McKiernan said. “You’re going to have states react to the federal issues, but I think here locally, I would think it's going to be positive pretty quickly.”

Local industrial development could also benefit from its more measured growth during a nationwide postpandemic boom.  

Whereas some industrial markets on the coast have faced declining rent growth as a result of oversupply during the period, the steadier growth in Chicago has enabled building owners to hold rents stable, said Dan Smith, vice president at Brennan.

Some owners in coastal areas are slightly panicking about what to do with assets that aren’t leased and are having serious discussions about getting more financing, panelists said.

Chicago has remained fairly steady even in a slower market. 

“Chicago never gets too far ahead of the skis,” Smith said.

First Industrial Realty Trust Senior Regional Director Adam Moore said coastal markets are now seeing drops of 10% to 20% year-over-year. While Chicago didn’t see as big of a run-up in rent growth as those markets did at their peaks, it isn’t seeing as big of a falloff now, he said.

In fact, some panelists said the first quarter could usher in a new wave of demand. 

In the first half of 2024, brokerages that track when deals in the market are expected to close had slated a lot of activity for the fourth quarter of this year, Moore said.

Over the summer, those brokerages started to push back many of the closing dates on their lists, and a lot of the activity has since been pushed into the first quarter of 2025, he said. 

Moore said he expects to see an increase in demand in the short to medium term. 

Robin Stolberg, managing director at Clear Height Properties, was even more bullish. 

“We're forecasting based on our pipeline that Quarter 1 of 2025 is probably going to be our strongest Quarter 1 in the past four to five years,” he said.

Chicago has maintained strong fundamentals because it hasn’t faced oversupply due to key players exercising financial discipline and even partially because some institutional capital has redlined the city due to perceived higher taxes and the widespread narrative that the city is unsafe, McKiernan said.

The city is one of the top five industrial markets in the country, he said. 

“Chicago right now is as healthy as I've seen it in probably 20 years,” McKiernan said. “You've got just a great user base here. Demand is, I think, consistently strong. It’s the place people have to be.”