Building from the Ground Up: Industrial Spec Spotlight

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industrial spec

Last year set some modern-day records for the Chicago industrial market, including a new high water mark for net absorption at 19.1 million square feet. With vacancy under 7 percent for the first time since 2001, JLL brought together its top industrial clients to discuss what’s next. The word of the day is spec, said JLL’s George Cutro, Director of Midwest Industrial Research. It’s 70 percent of the market’s development pipeline and returning to levels last seen in 2007.

industrial spec

Developer appeal in redevelopment persists in Cook County as developers focus their attention on building speculative facilities from 100,000 square feet to 500,000 square feet, with the O’Hare market drawing the highest level of redevelopment activity, according to George. The submarket’s recent spec successes and local tenants’ strong desire for modern product continue to drive redevelopment opportunities. Most of these projects are occurring south of the airport, where redevelopment sites are more prevalent.

What makes a prime site? Often a user-owned, functionally obsolete manufacturing facility, George said. As manufacturing owner/occupiers look to monetize their unusable real estate, developers can purchase at values that make sense for a redevelopment play. These new spec projects cater to a broad range of distribution or warehouse users that invest heavily in operations and are more likely to lease than own.

Let’s take a look at the latest airport-adjacent projects around O’Hare:

industrial spec

Developer: Bridge Development Partners
Address: 11600 W Grand Ave, Franklin Park
Size: 182,923 SF
Clear Height: 32’
Delivery: Q3 2016
Why it matters: This site’s above-market availability of 40 trailers and 152 car parks is ideal for users with a large workforce or heavy truck volume. Users that operate any sort of quasi-retail or showroom business would benefit from its monument signage opportunity along heavily trafficked Grand Avenue.

Developer: Pritzker Realty Group
Address: 11333 Addison St., Franklin Park
Size: 194,260 SF
Clear Height: 32’
Delivery: Q4 2016
Why it matters: This project will provide convenient access to O’Hare’s South Cargo Gate via the planned four-lane Taft Avenue Connector between Irving Park Road and Franklin Avenue. This is valuable proximity for both air freight and logistics firms and reduces transportation costs.

Developer: Panattoni Development Company
Address: 3400 Wolf Rd, Franklin Park
Size: 491,089 SF
Clear Height: 36’
Delivery: Q1 2017
Why it matters: A 28-acre infill site is extremely difficult to find and the tollway frontage affords unsurpassed branding and visibility to an image-conscious or consumer-based company. This is the largest project under construction in the O’Hare submarket.

Developer: Molto Properties/RREEF Property Trust
Address: 10501 Seymour Ave., Franklin Park
Size: 367,389 SF
Clear Height: 32’
Delivery: Q4 2016
Why it matters: Molto’s pre-sale joint venture with RREEF is notable because this unit of Deutsche Bank has stayed on the sidelines in Chicago industrial over the last couple of years. With this project and their recent Roselle portfolio purchase, RREEF is back in the game in Chicago.

George doesn’t expect O’Hare’s rash of spec redevelopment projects to slow, as the market continues to demand more modern, efficient product. While the primary challenge for these projects remains competitive rental rates, Cook County’s 6b tax incentives offset higher base rents with a significant drop in property taxes, he said.

View our latest industrial research here.

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