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2022 Q3 Chicago Industrial Market Report

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Rents Climb as Industrial Market Gets a Little Tighter

While industrial demand remained positive during the third quarter of 2022, the net absorption total of 6.9 million square feet was only 58 percent of the total recorded during each of the past three quarters and the lowest quarterly total since the fourth quarter of 2020. Despite falling off a bit, it remained above the 5-year quarterly average of 6.5 million square feet and was more indicative of how tight the market has become as opposed to a drop in industrial transaction activity.

The industrial vacancy rate continued its decline, although at a much more tempered pace. The overall rate fell to a new all-time low of 4.54 percent, a drop of only 4 basis points compared to the free-fall drop of 42 basis points per quarter on average recorded over the past five quarters. Submarket vacancy rates decreased in 14 of the 22 submarkets Colliers tracks, rising in only six submarkets. Vacancy has now dropped below 5 percent in 14 submarkets, while five submarkets recorded a rate below 3 percent by the end of the quarter.

Developers responded to the unparalleled demand witnessed during the second half of 2021 and the first half of 2022 by starting construction on a record 48 industrial projects totaling 17.2 million square feet during the third quarter, a total 32 percent greater than the previous high-water market of 13.1 million square feet of construction starts. Despite strong completions, this activity pushed total space under construction to 37.5 million square feet, 25 percent greater than the previous record of 30.1 million square feet recorded during the second quarter of 2021.

New leasing activity totaled 11 million square feet among 131 new leases and lease expansions between July and September. While this represented the fourth quarter in a row that the new leasing volume declined and the lowest quarterly total since the third quarter of 2020, the previous six quarters witnessed an unprecedented surge in new leasing activity, and the total for the third quarter was still impressive historically.

Key Takeaways

  • Industrial rental rates are up an unprecedented 13 percent year-over-year and are expected to continue to climb over coming quarters.
  • Demand, as measured by net absorption, dropped off during the third quarter due to limited supply, as the market’s vacancy rate dropped to another new low.
  • A record amount of construction starts were initiated during the third quarter, bringing the total under construction to a new high water mark of 37.5 million square feet.

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2022 Q3 Chicago Industrial Market Report

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Craig Hurvitz

Senior Director of Research

Chicago - Rosemont

I am vice president, market research at Colliers International | Chicago and lead the Industrial Advisory Group’s market research initiative. I am responsible for managing and maintaining the industrial properties database, which includes property sales and leases, tenant information and comparable transactions. I have a deep understanding of the Chicago-area industrial real estate market and provide in-depth analyses, reports and market trends that are referenced by a diverse group of clients including landlords, appraisers and developers. I am considered an expert in the field and am frequently featured in industry newspapers and publications. 

I have more than 10 years of industry experience having served as the director of research for both NAI Hiffman, and most recently Newmark Grubb Knight Frank. In this role, I oversaw the local research departments and provided comprehensive reports on market statistics in the Chicago and regional commercial real estate markets.

I began my real estate career as director of marketing for Rosemont-based Epic Realty Partners, now affiliated with Transwestern. 

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