NATION INDUSTRIAL MARKET
Though 100,000 manufacturing jobs in the Chicago region were lost during the recent economic downturn, the consensus among analysts and investors is that a modest manufacturing revival likely will take hold in the year ahead.
Nationally, the unemployment rate fell to 5.7% at the close of 2003, with an uptick noted in the manufacturing sector. The sector has been hit hard by overseas outsourcing and the reluctance of domestic employers to create new product and add inventory.
The Institute for Supply Management index, a good barometer for measuring the pulse of the industrial sector, is at 66.2, a solid increase of 3.4 points. A measurement of 50 is regarded as a sign of expansion.
Shipping and distribution businesses contributed $42.2 billion to the Chicago area economy in 2002, according to a report in Crain’s Chicago Business.
In Will County, five new high-tech warehouses to support the flourishing transportation sector have been built out of farmland and vacant fields.
Overall vacancy for all industrial building types closed the fourth quarter at 10.1%, down from 10.7% in the third quarter.
Submarkets that saw substantial improvement in vacancies from last quarter were Fox Valley (areas of Aurora, Naperville and West Chicago), Northwest (areas of Arlington Heights, Mount Prospect and Schaumburg), O’Hare (primarily Bensenville, Des Plaines and Elk Grove Village) and West Cook II (areas of Broadview, Cicero and Hodgkins).
Other submarket vacancy rates in Chicago’s industrial market remained surprisingly stable and should continue to slowly stabilize into 2004 as key industries begin to finally hire in an effort to match improving production and demand numbers.
DENVER
After appearing to be on the verge of a market recovery, Denver’s industrial market has seen two consecutive quarters of negative net absorption and rising vacancy rates.
The negative activity hasn’t been substantial, and Denver’s overall vacancy rate remains below 10%,anticipation of a recovery is building.
Economic reports give every indication that the nation is emerging from its recent recession and the commercial segments should begin to exhibit positive signs of this turnaround.
At one time it looked like the Denver industrial market was at the bottom and would begin to slowly improve by the end of 2003. Instead, it ended the year in the red.
Nevertheless, a rebound is expected to begin in early 2004.
The positives for the industrial sector are that the increase in vacancy rates has slowed considerably, the majority of the industrial submarkets still are reporting single-digit vacancy rates and numerous large transactions occurred last year, with more expected during the beginning of 2004.
Big fourth-quarter deals include: General Motors Corp. occupying a new 404,000-square-foot facility at ProLogis Park 70, Imprints Wholesale leasing more than 100,000 square feet, while OfficeScapes took 63,000 square feet at two separate buildings in Stapleton Business Center.
Additionally, more than 1 million square feet of industrial space is under construction. About 30% of that space is preleased.
While the market recovery is taking its time to fully emerge, it’s looking like it will begin in earnest during 2004.
