Key Takeaways |
35.6 million square feet under construction
The second greatest quarterly total in the market’s history, 90% is spec
9.8 million square feet delivered during Q4 2022
The second greatest amount of new space delivered during a single quarter
7.3 million square feet of construction starts in Q4 2022
Developers started construction on 31.8 million square feet of new product in 2022, the largest annual total in the market’s history
3.1 million square feet leased in recent spec product
The lowest quarterly total for new leasing activity in recently-completed spec buildings since 2020, though 2022’s total is strong at 22.8 million square feet
90 percent leased – speculative projects built since 2013
Four consecutive quarters of record speculative construction deliveries has pushed the vacancy rate up by 313 basis points in recently-completed spec product
Speculative construction projects since 2013 by leasing status
Vacancy in Recent Spec Climbs Due to Record Deliveries
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Chicago Industrial
Construction Review
Record Spec Deliveries Bring
New Product to Tight Market
Q4 2022
Spec Development During Current Cycle
Total quarterly spec deliveries, new leasing activity, and vacancy rate in spec built since 2013
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Q4 2022
Developers delivered 6.5 million square feet of new speculative product during the third quarter of 2022 – a new quarterly record – then repeated that total during the final quarter of the year. Over the course of 2022, 64 speculative buildings totaling 20.8 million square feet were delivered, a 35 percent increase over the previous record of 15.4 million square feet of speculative deliveries recorded in 2019.
Tenants continued to lease space at a fervent pace in recently-completed speculative buildings and even buildings still under construction during each quarter of the year. However, the pace of speculative deliveries during the last three quarters of 2022 exceeded the amount of space leased in each quarter, resulting in the first increase to the vacancy rate in recently-completed speculative product since 2019. This rate climbed by 313 basis points since hitting a low of 7 percent during the first quarter of 2022, increasing during each quarter to 10.1 percent at the end of the year.
During the final quarter of 2022, 15 new leases totaling 3.1 million square feet were signed in new product, the lowest quarterly total since the second quarter of 2020. Five leases totaling 888,153 square feet were pre-leases in under construction speculative buildings, while one was a build-to-suit lease. The largest lease of the quarter involved building materials and fastener purveyor PrimeSource Building Products leasing the entire 1,019,200-square-foot speculative building recently developed by Elion Partners at its Elion Logistics Park 55 industrial park in Wilmington. Despite the dip in new leasing activity during the fourth quarter, 116 new leases totaling 22.8 million square feet were signed in new product during 2022, an impressive total only slightly behind 2021’s total of 26.4 million square feet.
Total construction starts by quarter and type
Developers started construction on a record 109 buildings totaling 38.1 million square feet during 2022 – an 8.2 percent increase over the previous high water mark of 35.2 million square feet of construction starts recorded in 2020. 84 percent of these starts were speculative projects comprised of 88 buildings totaling 31.8 million square feet – a new record by an astounding 42 percent over the previous record of 68 speculative buildings totaling 22.4 million square feet started in 2021.
While the pace of development is anticipated to slow a bit during 2023, another 18 million square feet of new construction – including over 15 million square feet of additional speculative product – is slated to begin construction over the coming four quarters. This pullback in development will be beneficial to the market, allowing much of the speculative space delivered during 2022 to lease, alleviating concerns of a glut of modern speculative space sitting vacant in the market, and maintaining a balance between supply and demand.
Spec Projects Represented 84 Percent of Starts in 2022
Total speculative construction deliveries by year and occupancy
Developers delivered more speculative space in 2022 than any other year in the market’s history, totaling 20.8 million square feet. While 56 percent of the space delivered this year remained vacant at the end of 2022, another 95 million square feet of speculative product was delivered between 2013 and 2021, which was only 2.7 percent vacant at the end of the year. Despite the big surge in speculative development witnessed during 2022, strong demand will likely result in most of that space being leased by the middle of next year.
Developers were underway on 80 new speculative buildings totaling 30.2 million square feet at the end of 2022 – another new record for the most speculative space under construction at one time in the market’s history. While only 10 percent of that space was pre-leased at the end of the year, strong demand for modern product will translate to these buildings as well, especially once much of the product built during 2022 is leased up.
Only the Newest Spec Buildings Are Vacant
Elion Partners started construction on a 1,002,000-square-foot speculative building in its Elion Logistics Park in Wilmington.
Q4 2022 Largest Construction Start
Phase II of Meta/Facebook’s data center campus in DeKalb is the largest project actively under construction, totaling 1,493,000 square feet.
Q4 2022 Largest Building Under Construction
Venture One Real Estate completed construction on a 1,160,150-square-foot build-to-suit facility for Amazon in Huntley.
Q4 2022 Large Construction Completion
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Grant Levin
Research Analyst
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