Industrial Market Report - H1 2023
At the midpoint of 2023, the Chicagoland industrial market fundamentals remain to be very strong, with 13 consecutive years of positive net absorption. Over the past 3 years, rents have escalated significantly by nearly 67%. With the overall vacancy rate in the Chicagoland area sitting at 4.1% (according to CoStar Data), this sits well below historical averages, which hovers around 7.0- 8.0% in a healthy market.
In the south/west submarkets of Chicagoland, the reported vacancy rates are considerably lower than the Greater Chicago market with a few exceptions, as highlighted below:
Far South Cook: 2.3% – Joliet Area: 3.3% – I-88 West: 3.4%
Near South Cook: 4.8% – Near SW Suburbs: 1.7% – North I-55: 1.6%
South Chicago: 4.6% – South I-55: 3.1% – West Cook South: 1.7%
Additionally, this data does not demonstrate where the vacancy lies exactly – spaces that do not exceed 200k SF are much more difficult to come by. Although increasing rents steady from record highs, businesses that operate out of less square footage may be subject to strong market conditions.
Considering rents have increased and continue to do so from initially negotiated base rents, there lies an opportunity for tenants to sublease their space at an appreciated value from current payments. This may be looked as a positive in many ways for tenants, and particularly for companies that are locked into a long-term lease, with the desire to consolidate, expand or right-size their operations.
Landlords have been more compliant to release tenants from their lease obligations with the goal to capitalize on higher rent payments, and this can be seen as a viable way to increase revenue for both the landlord and existing tenant who occupies the space. Overall, subleasing has more than doubled in the past year, with many companies looking to their real estate portfolio to adjust their operating expenses.