HEARTLAND SNAPSHOT, AUGUST 2006

Suburban Chicago Industrial Market

Local and national development firms have a strong appetite for industrial development in all the major submarkets in the Chicagoland area. Fully improved sites that are zoned, annexed and near a major interstate are being absorbed at a rapid pace. Due to the maturation and success of the five major industrial corridors — Interstate 55/Interstate 80, Elgin/Interstate 90, Central DuPage, Fox Valley/ Interstate 88, and Lake County — developers have begun to acquire land on the periphery of these submarkets. These submarkets have benefited from the strength of the greater Chicagoland and O’Hare markets. Access to major highways and quality labor have attracted entrepreneurial-type companies as well as national and Fortune 500 firms. Currently, there is activity in all of these markets, with an array of industrial product being delivered, from incubator space to 120,000-square-foot, multi-tenant facilities to 500,000-square-foot one or two-tenant distribution facilities.

Opus Development will begin a 100-acre business park in West Dundee within the Elgin/I-90 corridor by the end of the summer. The developer has initial plans to break ground on buildings from 150,000 to 300,000 square feet. Opus will offer additional properties for build-to-suit opportunities. Panattoni Development has had much success with infill developments in Lake County, as well as its developments in Bolingbrook and Romeoville in the I-55/I-80 corridor. Panattoni has developed several million square feet and has been successful in filling its properties in a short period of time. Dandee Display Fixtures recently leased 340,000 square feet in Panattoni’s development at 1401 W. Normantown Road in Romeoville. A little to the south, TCB Development has experienced success in southern Will County and the I-80 marketplace.

Rental rates for industrial product throughout the Chicagoland submarkets range from $2.50 per square foot triple-net for larger distribution facilities of 400,000 square feet or greater to $5.50 per square foot triple-net for incubator-type buildings with available spaces of 30,000 to 40,000 square feet.

Vacancy rates vary from market to market, ranging from 9.5 to 15 percent. Some of the higher vacancy rates are in markets in which there is a great deal of speculative construction. In fact, some of the higher vacancy rates in the I-55/I-80 market are skewed due to the numerous speculative developments that bring on new square footage on a monthly basis. As a whole, the Chicagoland industrial market is healthy and more in line with a vacancy rate of 9 to 10 percent.

The submarket to watch closely for growth in the near future is found in Chicagoland’s eastern quadrant. Located approximately 20 miles from the O’Hare International Airport, the Elgin/I-90 marketplace will continue to mature and grow at a rapid pace. Major industrial developers have planted their flag in the I-90 market, including Opus’ acquisition and development of its new 100-acre business park. Developers are attracted to the I-90 marketplace due to the favorable real estate tax base of Kane County, the access to major highways, the proximity to O’Hare and the labor pool’s availability to companies seeking to locate to the area.

The Chicagoland industrial market is one of the strongest in the country. It will remain so due to the market’s central location within the United States transportation pipeline and the diversity of the businesses that occupy space throughout the various submarkets.

— Noel Liston is a principal with Chicago-based Darwin Realty & Development Corporation.

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