Chicago industrial market picking up steam

The Chicago industrial market is recovering well.

The Chicago area has experienced a large improvement in its industrial market, which may make some property management companies optimistic about the future.

National Real Estate Investor cited a Marcus and Millichap report which showed approximately 1.7 million square feet of spec development space is set to be completed in the city by the end of this year. This is lower than 2011's figure of 2.5 million square feet, but shows that the city still is looking for more space.

"It is not a broad-based recovery for spec development, but we're definitely seeing a return of spec development in very select product types, user sizes and submarkets," Mark Saturno, chief operating officer at McShane Development Co., told the news source.

In addition, the findings may be part of the reason that vacant space is being absorbed, the news source noted. A CBRE report showed that while vacancies in the city were more than 11.5 percent during the first half of 2010, at the end of the first quarter of 2012, this fell to nearly 10 percent. However, there is still more than 1 billion square feet of space unoccupied in the area.

Leases have increased for large amounts of space in the city, as many companies have looked for large acquisitions in recent months, NREI explained. Close to 70 percent of the property created in the city from 2002 to 2008 was considered to be spec. The total amount of property constructed during that time was between 17 million and 18 million square feet.

"Across the whole market, large blocks of space are being absorbed, mostly by default because nothing new is going up," Brian Carroll, senior vice president at Newmark Grubb, told the news source.

Furthermore, property management companies could see an increase of property absorption as the market recovers, the news source added. In addition, apartment development is expected to increase, due to the city's high-level of occupancies, coupled with strong rent growth. Approximately 900 apartment properties are expected to finish development by the end of the year, which is close to a 300 percent rise compared to last year's figures. There also have been many companies looking to invest in Class B properties, due to such a high interest in Class A offerings.

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