A healthy amount of activity is continuing in the industrial sector in the Chicago area, but because of the amount of new product being built, vacancy rates are refusing to fall.
Brokerage firm reports for the first half of 1994 all show a good deal of leasing, buying and building on the part of industrial firms, most of whom have a demand for modern, high-ceilinged warehouse and distribution buildings.
But vacancy rates remain just about where they were a year ago at an average of about 9 percent.
“A shortage of functionally clean space throughout the metro area has users moving out of existing space and either buying what is available or completing build-to-suit transactions that specifically address their needs,” said Terrence O’Hara, senior vice president at Grubb & Ellis.
“As a result, while activity is good, absorption of space and overall vacancy rates really have not changed,” he said.
Grubb & Ellis said its market survey found a 9.9 percent vacancy rate in the area’s industrial properties at the end of the second quarter, up from 9.4 percent at the end of the first quarter but even with the rate from one year ago. The vacancy rate for the city was 11.1 percent versus 9.6 percent in the suburbs.
O’Hara said it is unlikely vacancy rates will fall in the coming months because at least 10 new speculative industrial projects, all in excess of 100,000 square feet, are poised to be built yet this year. Again, the demand for the modern space, called high-cube, is driving the new construction.
Large users have fewer options in the market than they once did, said Stephen Kozarits, a senior vice president with CB Commercial Real Estate Group. There are 21 buildings with clearances of 21 feet or more currently available that can accommodate tenants of 125,000 to 175,000 square feet, he said. Two years ago, 50 such properties were available.
CB Commercial, which measures vacancies in properties of 10,000 square feet or more, said 8.7 percent of that space was empty as of June 30, compared to 8.3 percent at the end of the first quarter and 9.1 percent at mid-year 1993.
CB said the markets showing the best overall gains in the last year were in north DuPage County and northeast Cook County, while the far west suburbs, North Side of Chicago and Central Kane/DuPage counties saw the biggest rise in vacancies.
Rivercrest revival
Mid-America Asset Management Co. has arranged leases totaling 66,330 square feet for new T.J. Maxx and PetsMart stores at the Rivercrest Shopping Center at Illinois Highway 83 and Cicero Avenue in south suburban Crestwood.
Both stores are scheduled to open in August in the former PharMor building in the center. Bradley Real Estate Investment Trust purchased the 429,054-square-foot Rivercrest Center last March.
T.J. Maxx, a discount clothing store, leased 34,830 square feet and PetsMart, a pet supplies store, leased 31,500 square feet. Dick Spinell, Mid-America principal, said it will be the 30th T.J. Maxx store in the Chicago area and the 15th PetsMart store.
Don Lyon of Mid-States Bradford represented PetsMart in the lease transaction. Mid-America represented both owner and tenant in the T.J. Maxx transaction.
Other leases and sales
– Equitable Real Estate Investment Management Inc. has acquired the 36-story 444 N. Michigan Ave. building from Northwestern Mutual Life Insurance Co. for $22.6 million. The purchase of the 504,000-square-foot property was funded by Equitable’s real estate value enhancement fund, a pooled plan for pension investors.
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Steve Kerch’s columns appear in Real Estate on Sunday and in Your Money on Thursday.
