WESTMOUNT INSIDER: How Has COVID-19 Impacted Industrial Leasing in Chicagoland?

Brian Scruggs, Managing Director of Industrial Acquisitions, shares three trends in the Chicago market that have risen to prominence since the onset of the pandemic.

The Windy City, The Second City, The City That Works – all endearing names for the world-famous city we all know as Chicago. Chicago is the third largest U.S. city by population with one of the most economically diverse local economies in the nation. Over half a million jobs have been created in Chicagoland since 2010.

Despite the difficulties induced by the global pandemic, the Chicago industrial market has continued to make headway as additional space is needed to support the ever-growing local economy. However, it would be wildly inaccurate to say that COVID-19 had little or no effect on our industry.

The pandemic has shifted the landscape of industrial leasing and strategic investment in Chicagoland, altering tenant needs, the types of tenants seeking space, and where they are looking. Here are three trends that we’re seeing now in the Chicago industrial sector:

 

  1. Negotiation of More Flexible Lease Terms

Shorter lease terms on tenant space have become a predominant request as a preventative measure against surprises like the pandemic. Rent growth remains strong with increases of approximately 10-15%. Tenants appear to prefer the higher price per square foot as an offset to maintain flexibility in an uncertain environment. This can become a huge benefit to the landlord if market conditions persist and inflation returns.

 

  1. Supply Chain Inefficiencies Force Companies to Reevaluate Space/Technology Needs

The significant changes in supply change demand have led to great acceleration for industrial space. Companies that previously did not invest much into e-commerce have to respond in kind now in order to survive and stay close to their customers. The increased consideration to invest in technologies, along with preventative measures to avoid shortage, has put more emphasis on efficiency and forecasting.

Generally, there has been an increase in demand for suburban flex space, smaller spaces, and appeal toward potential office buildouts within industrial flex parks.

 

  1. Growing Diversity of Tenants Seeking Space

An interesting trend that has resulted from the pandemic, is the new ability for people to make easy and advantageous geographical transitions with the newfound freedoms of hybrid work environments. Many industrial companies have seen such great expansions within their industries, that they now require more space than had anticipated. Companies like moving companies, e-commerce purveyors, and supply chain solution companies are growing significantly which has created the need to rent larger scale physical space for their business expansion in coordination with the state’s reopening. Even many of the smaller tenants who have successfully shifted during the pandemic, are now looking to scale up their business models.

 


 

Author: Brian Scruggs

Brian is the Managing Director of Industrial Acquisitions at Westmount Realty Capital, LLC. He heads up the firm’s Midwest U.S. industrial acquisition activities and has more than 17 years of experience in commercial real estate. Prior to joining Westmount, he was the vice president of Colony Capital in Irving, Texas. As vice president, he oversaw the leasing and asset management of more than 6 million square feet of industrial real estate in the Chicago, Minneapolis and Memphis area. Scruggs was also the vice president of acquisitions for AMB Property Corp, where he managed all aspects of the acquisition of 7.2 million square feet of industrial real estate in the Chicago and Minneapolis markets with an aggregate value more than $480 million.

To learn more about Westmount Realty Capital or for additional information, contact us at info@westmountrc.com or find us at https://westmountrc.com/.

 

This article, and Westmount Realty Capital blogs in general, is intended for informational and educational purposes only, and does not constitute a solicitation or offer by Westmount Realty Capital, LLC to buy or sell any securities, futures, options, foreign exchange or other financial instrument or to provide any investment advice or service. Westmount is not your advisor or agent. Please consult your own experts for advice in these areas. Although Westmount provides information it believes to be accurate, Westmount makes no representations or warranties about the accuracy or completeness of the information contained on this article.

 



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