Key Takeaways |
12.5 million square feet under construction
40 buildings underway, 27 of which are being built on a speculative basis totaling 5.9 million square feet, or 47 percent of the total.
6.6 million square feet delivered during Q1 2024
A 47 percent decrease compared to the 12.4 million square feet of completions recorded last quarter, the third-lowest quarterly delivery total in Chicago’s industrial market since 2022.
2.0 million square feet of construction starts in Q1 2024
A 60 percent decrease compared to the 4.8 million square feet of starts recorded last quarter, the lowest quarterly total since the first quarter of 2019.
2.7 million square feet leased in recent spec product
A 22 percent decrease compared to the 3.4 million square feet of new leases signed in recently completed speculative product last quarter.
Recent spec deliveries are 79 percent leased
The vacancy rate in recent spec product climbed for the eighth quarter in a row due to completions outpacing new leasing activity.
Speculative construction projects since 2013 by leasing status
Chicago’s Construction Pipeline Fell Again and Build-to-Suits Overtake Spec Development
Diana Perez
Research Director
diana.perez@colliers.com
+1 847 384 2812
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Chicago Industrial
Construction Review
Chicago’s Development Pipeline Fell to its Lowest Level in Nearly Six Years
24Q1
Spec Development During Current Cycle
Total space and number of buildings under construction by quarter and type
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24Q1
For the third consecutive quarter, new deliveries significantly outpaced construction starts.
At the end of March, construction was ongoing for 40 buildings, totaling 12.5 million square feet, marking a 27 percent decrease from the previous quarter. This represents the smallest volume of space being constructed in the Chicago market since the second quarter of 2018.
Construction starts totaled 2.0 million square feet across 8 projects. This is the lowest quarterly total since the fourth quarter of 2019.
6.6 million square feet of build-to-suits are currently under construction, the most activity since the third quarter of 2022. This is the first time build-to-suit activity has outpaced speculative activity since the second quarter of 2021.
Total quarterly spec deliveries, new leasing activity, and vacancy rate in spec built since 2013
Speculative construction deliveries tallied 5.5 million square feet among 14 buildings during the first quarter of 2024. While still a historically strong total, this was well below the record-breaking 11.7 million and 9.4 million square feet of spec deliveries recorded during the third and fourth quarter of 2023 respectively.
There were 20 new leases totaling 2.7 million square feet signed in recent speculative product during the quarter, a 22 percent decrease compared to the 31 new leases totaling 3.4 million square feet signed during the fourth quarter of 2023. This is the third lowest quarterly total for new speculative leasing since 2020.
Between January and March, the vacancy rate in recently completed speculative buildings increased 78 basis points to 20.58%. This is the highest vacancy rate in recent speculative product since the third quarter of 2020. The Chicago market saw an addition of 4.4 million square feet of vacant speculative space, a 36 percent decrease compared to the 6.8 million square feet added to the market last quarter.
Vacancy in Recent Spec Rose Again, But at a Slower Pace
Total speculative construction deliveries by year and occupancy
2022 and 2023 were historic years for speculative development. Last year alone, developers delivered 33 million square feet of speculative product, including 21.1 million square feet across the last 6 months of the of the year. This product was only 29 percent leased at the end of the first quarter. This total will rise throughout 2024, but at a slower pace due to the quantity of spec product delivered over the course of the recent development boom.
Speculative development delivered during the first quarter of 2024 was 21% leased upon completion. The largest lease in these newly completed buildings was Ceva Logistics for 707,953 square feet in Melrose Park
Another 27 speculative buildings totaling 5.9 million square feet were under construction at the end of March. These buildings were only 5 percent pre-leased. This figure sat at 11 percent last quarter.
Recent Surge in Deliveries is Impacting the Leasing Status of New Spec Construction
Crow Holdings is underway on a 1,199,108-square-foot build-to-suit facility for GE in Morris.
Q1 2024 Largest Construction Start
Uline’s 1,440,000-build-to-suit in Kenosha is the largest building under construction.
Q1 2024 Largest Building Under Construction
NorthPoint Development delivered a 1,139,153-square foot speculative building at 201 W Compass Blvd at its Third Coast Intermodal Hub in Joliet.
Q1 2024 Largest Construction Completion
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Grant Levin
Research Analyst
grant.levin@colliers.com
+1 847 544 5730