For the second straight year, the city of Chicago showed a positive gain in industrial activity that when coupled with the elimination of more than 1 million square feet of obsolete space helped drive down vacancies to near the national average.
In the suburbs, the industrial news is even better, with more than 3.6 million square feet of absorption reported in 1993, according to the latest statistics from the Society of Industrial and Office Realtors reported last week. In 1992, the suburbs saw a negative absorption of more than 6.5 million feet.
“Overall, 1993 was a very strong year,” said Anthony Lydon, senior vice president of Grubb & Ellis. But Lydon said the leasing gains were coming at the expense of landlords, who are seeing no increases in rental rates or sale prices for their property.
The Midwest in general, and the Chicago suburbs in particular, are benefitting from a high level of warehouse/distribution space demand, Lydon said. Home building, automobile and food companies and suppliers are leading the way, he said, with public warehousing operators also leasing sizable chunks of space.
In the suburbs, industrial vacancies fell in 1993 to 9.48 percent from 9.82 percent at the end of 1992, SIOR said. However, that rate was still above 1991, when vacancies were 8.42 percent.
City vacancies declined to 10.9 percent from 11.4 percent a year earlier. At the end of 1991, city vacancies were 12.4 percent.
“The demand for city property is employment sensitive,” said Kevin Kete, executive vice president of Paine/Wetzel Associates. “And there is pretty good demand in the city.”
“The largest of these deals are on the South Side, for down-and-dirty, old-fashioned manufacturing,” Kete said. “But we are also seeing about 25 percent of all the activity in the bread-and-butter deals, of 25,000 to 90,000 square feet, and those leasing decisions are driven by business decisions, by demand.”
The national industrial vacancy rate was 10.2 percent at the end of 1993; the Midwest as a region fared far better, reporting just 8.5 percent vacancies, SIOR said.
Reworking Hawthorne
Phase I of a $28 million commercial project on the site of the Western Electric Hawthorne Works at 26th Street and Cicero Avenue in west suburban Cicero is scheduled to begin this month.
Salvatore DiMucci, president of the Palatine-based DiMucci Companies, said last week that his firm will proceed with development of the site, which will encompass 26 acres in the initial phase with 30 more acres in two additional phases.
The first phase will include construction of a 100,000-square-foot-plus Home Depot home improvement store and the redevelopment of a 139,000-foot Sam’s Club warehouse.
Plans for a big Wal-Mart store on the site were withdrawn last May. Wal-Mart owns Sam’s Club.
The redevelopment project is being undertaken in conjunction with the town of Cicero and is being funded by tax increment financing bonds, a plan under which infrastructure development costs are paid by bonds that are in turn repaid by added tax proceeds from the new development.
Cicero Mayor Betty Loren-Maltese said the new retail development “testifies to the continued vibrancy of the town of Cicero.”
Phase I of the project will be completed over the next two years, said DiMucci.
“After the initial phase is open, two additional phases are planned, which will extend the center as far south as 31st Street and increase the retail space by another 300,000 square feet,” he said.
Kohl’s hunts site
Opus North Corp. has purchased 12.5 acres in the Grand Hunt Center in north suburban Gurnee from Western Development Corp. and plans to build a 133,000-square-foot shopping center on the land.
Gary Pachucki, Opus real estate director, said Kohl’s department store has leased more than 80,000 square feet in the project and that negotiations are underway with additional tenants.
The Grand Hunt Center is on 60 acres at Grand Avenue and Hunt Club Road and already includes Target and Circuit City retail stores.
Pachucki said Opus also was in negotiations with Western to purchase more acreage for additional store development due to expected demand from retailers.
Other leases and sales
– Menard’s, the home improvement chain, has leased 117,000 square feet at Hall Plaza, a 250,000-square-foot retail center at 4600 W. Diversey in Chicago. Imperial Realty Co. of Chicago, which represented the center, said Menard’s would open in the fall.
– Oswego-based Westell Inc., a maker of telephone network equipment, has leased 30,000 square feet at Fox Valley Executive Center, 75 Executive Drive in Aurora, and will relocate its engineering and marketing departments there in March, according to owner JMB Realty Corp.
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Steve Kerch’s columns appear in Real Estate on Sunday and in Your Money on Thursday.
