NATION INDUSTRIAL MARKET
CHICAGO
Local industrial markets remain the sturdiest pillar in the uncertain local real estate economy, as forecasters confidently predict that the pace of growth across all sectors is accelerating.
Economists expect 3.5% to 4% growth in the second half,certainly enough to stimulate employment.
The stock market is slowly rising. The Federal Reserve has cut interest rates to record lows.
The housing market is surging,though the mortgage loan application index fell slightly in July,and consumer spending has remained steady.
So why does Corporate America continue to consolidate and cut payroll?
Lack of confidence, many say.
Despite hopeful predictions of increased spending in the third and fourth quarters, businesses simply do not see a rising demand for their products, and consequently there is a general reluctance on their part to add to physical inventories and increase headcount.
In May, U.S. inventories at the wholesale level fell 0.3%, pointing to less production by manufacturers.
Forecast
While it will take some time for an improving national economy to trickle down to the real estate market, reports indicate an increase in leasing activity on the local front, despite recent layoff forecasts by Chicago-area employers.
Unfortunately for the manufacturing sector, local employment projections show an increase mainly in retail, educational and health services.
Northwest Chicago boasts the most aggressive plans for employment growth, primarily encompassing call centers and financial based activities including mortgage-processing centers.
While Chicago’s new construction activity does not reflect a significant increase, some developers are taking full advantage of construction-ready sites primarily in available areas in and around existing business parks.
With a path of progress set, these locations alleviate the time and financial constraints associated with infrastructure improvements and establishing demand for areas with future development potential.
Challenges
Although the Chicago industrial market finds itself mired in a down market that can be traced back to late 2000, there are still opportunities available to industrial end-users and investors, particularly in the investment and development markets.
Investors continue to both develop and acquire industrial properties in the Chicago market as interest rates remain attractive. Most investment activity has been driven by real estate investment trusts and private investment groups.
Demand for buildings for investment remains high for the older industrial buildings due to low interest rates available to finance these aging structures.
Newer buildings with long-term tenants also remain an attractive option for investors and they are selling at top rates.
With 5% to 7% annual return rates commonly realized for industrial investment vehicles, the investment market is outperforming the stock market, which has been characterized by double-digit negative returns in the past several years.
Several large developments offer industrial users a myriad of choices with respect to prospective site locations.
Specifically, the I-39 Logistics Corridor, which runs south from Madison, Wis., to Bloomington, Ind., provides many development opportunities and is considered the next hot spot for large distribution or logistics companies.
Park 88, a 425-acre business park masterplanned for nearly 7 million square feet of distribution, bulk storage and warehouse and manufacturing space, is positioned near DeKalb to become the ideal Midwest regional distribution center.
It is a prime location directly linked to the major central Illinois interstate system with easy access to six local, region and international airports.
Park 88 also boasts major rail access in addition to being home to many Fortune 500 companies who collectively occupy almost four million square feet.
Also centrally located in the I-39 Logistics Corridor is the 5 million-square-foot, 200-acre LogistiCenter in Rochelle, Ill., about a half-mile from the 1,200-acre Union Pacific Global III Intermodal facility.
