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Top Industrial Market to Watch: Chicago, IL
Chicago has experienced a reversal in its unemployment rate, moving upward to 6.7% in January of ‘16 from recent lows in the 5% range in 2015. The industrial sector has been relatively stable and growing, with key industries such as Construction and Trade, Transportation, and Utilities growing at 5.8% and 1.3% annualized rates, respectively. Manufacturing remains flat at –0.2% annualized growth. Chicago industrial space is growing as vacancy falls while new space is being added. Given the location of Chicago and its linkages of rail, airport, and river, it is a natural point for distribution to much of the United States. Hence, it should benefit from the e-commerce growth discussed herein. The risk facing the Chicago industrial market comes from its amount of heavy industrial manufacturers that could lose demand in a global slowdown or face competition due to a strong US dollar.
Advisor Insights: SVN | Chicago Commercial
SVN Advisors at SVN | Chicago Commercial have some industrial market highlights to share:
Chicago continues to lead the country in industrial activity and represent the second largest industrial market in America. This sector shows little sign of slowing down anytime soon. The O’Hare sub-market continues its strong development as a logistics hub to the world and all of the freight distributors and logistic providers are taking advantage of this incredible amenity at the center of rail and highway system supporting it.
There is a tremendous amount of what by modern standards would be considered functionally obsolete industrial property, particularly in the 5,000 to 75,000 square foot size, however the demand for such space at affordable rents and nearly in-fill locations makes this the next product and geography to watch. Owner-user real estate in the industrial product continues to be in high demand and short supply in the market today. Investors are scrambling to buy what they can in nearly all sizes of both warehouse and industrial/manufacturing spaces.
Cold storage and refrigerated space could play a significantly larger role in the new Chicago industrial landscape. The explosive growth in food services, restaurants, bars and hospitality is exponentially putting pressure on existing refrigerated facilities. New construction or adaptive re-use in the “cold” sector is clearly financially feasible today and will only gain in its popularity from both the user and the investor side of the industrial market.
To read more on other top industrial markets, download the full version of the 2016 Industrial Market Outlook report here.