Chicago Market Quiets, But Not Silent Yet

Despite an overall bleak picture for Chicago’s industrial and office product, the market is still seeing activity.  Over the past few days, the city has seen both an industrial lease deal and the announcement of an office development, but such deals are becoming a rarity rather than the norm. Bristol Group Inc. agreed to terms on a lease with PODS of Chicago, which will occupy some 81,250 square feet of warehouse and distribution space in recently constructed 11240 Katherine’s Crossing, a facility located within Wood Hill Crossings Business Park in Woodridge, Ill. With the PODS lease, Bristol Group has now executed more than 200,000 square feet of new leases, expansions and lease renewals at Wood Hill Crossings during the last 90 days. But such deals are becoming fewer and farther betwen, as the Chicago industrial market is not expected to show any signs of recovery until 2010, according to a fourth quarter report by Grubb & Ellis Co. Industrial property is going through a cycle of increased vacancy rates heading into 2009. Rental rates are expected to soften as tenant demand declines in the forthcoming months. As interest rates are plummeting to historical lows, there is hope for the credit markets to begin a cautious recovery, the newsletter said. Meanwhile, Chicago’s office trends aren’t much different. In the suburbs, the vacancy picture is dramatic at 22.4 percent, up 80 basis points from the previous quarter and 240 basis points year over year, according to the Grubb & Ellis. All suburban submarkets combined lost almost 900,000 square feet of occupied space. But a bright spot in this gloomy picture is the healthcare industry, which is still growing. Companies today are being forced to cut expenses and to become as lean and efficient as possible. Many jobs have been lost and businesses are beginning to outsource operations that once used to be handled internally. As this trend progresses further the downsizing of space requirements will persist, according to the Grubb & Ellis report. One medical-related transaction inked recently was Delta Dental of Illinois’s plans to build an 85,000-square-foot office building in a prominent, high-profile Naperville location. Ryan Companies US Inc. has designed and will construct the building and will relocate its offices leasing approximately 20,000 square feet of space in the building. In relocating its corporate offices and operations from Lisle to Naperville, Delta Dental of Illinois will significantly expand its occupied space. The company currently leases approximately 43,000 square feet at 801 Ogden Avenue in Lisle. The new home of Delta Dental will be four stories, with floor plates averaging about 20,000 square feet of space.In selling almost five acres of land to Delta for this building, Ryan retains approximately three acres of the land it acquired in 2005. With that land Ryan could develop a building totaling 35,000 square feet of space.