Big-box warehouse construction keeps rolling along, this time in the nation’s hottest real estate market.
In Chicago, 48 big-box buildings — defined as 200,000 square feet or more — were delivered during 2022, more than at any time in the market’s history, according to data published on Monday by Colliers International Group Inc., a real estate services firm (NASDAQ: CIGI). The total square footage of those buildings stood at 25.5 million square feet.
Of the 48 buildings delivered, 35 were built on speculative (spec) construction, meaning there were no tenant commitments prior to construction. This was the greatest number of spec big-box spaces completed in Chicago during a calendar year, Colliers said. It was also a stunning 46% above the previous record set in 2019, according to the firm.
The high number of spec building development generally underscores the strength of a warehouse market and developers’ confidence in its continued growth.
Ironically, the surge in development pushed the big-box vacancy rate to 4.19% during the last three quarters of 2022, up from an all-time low of 2.61%, according to Colliers data. This came despite strong leasing activity.
Average big-box starting rents hit $6.18 per square foot last year, a 20% increase year on year Colliers said.
Amazon.com Inc. accounted for two of the six largest leases, with a 1.035 million-square-foot lease in the red-hot southwest suburb of Joliet, Illinois, and a 1.004 million-square-foot lease in Kenosha, Wisconsin, according to Colliers figures. The largest on the list was industrial retailer ULine, which occupied a 1.05 million-square-foot facility in Bristol, Wisconsin, during the third quarter.
Big-box warehouse leasing has been thundering along nationwide for several years and has not been deterred much by higher interest rates. Demand from e-commerce companies and retailers expanding into e-commerce has not abated other than a dip in the first half of 2022.