The industrial construction market in the Chicago area has been through a series of shifts and adaptations, as revealed by Trevor Ryor, Vice President of Clayco‘s Industrial Business Unit. It may face its share of challenges, but the market is characterized by resilience, adaptability and a forward-looking approach, which promises exciting opportunities for stakeholders.

“There are conversations being had on build-to-suit opportunities,” Ryor shared. “Capital lenders appear to be more cautious regarding their investments, which is affecting what deals can get done and/or may require longer holding periods. The speculative warehouse/distribution market has subsided a bit, whereas interest and discussions in cooler/cold storage facilities have seen an uptick.”

Addressing the record completions delivered in 2023, Ryor said that has led to a rise in vacancy rates in the Chicago industrial landscape. With minimal new developments in 2024, rental rates are starting to tick up.

“Until new construction begins, and new space is made available, rental rates will most likely see a slight rise,” said Ryor.

Trevor Ryor, Vice President, Clayco
(Photo courtesy of Clayco.)

The announcement from the Fed regarding the absence of further interest rate hikes, however, offers a glimmer of hope, potentially alleviating some pressure within the market and allowing developers to strategize for upcoming projects.

“This will allow developers to begin working on deals that will start later 2024 or 2025,” Ryor said.

That’s advantageous because of the shifting demands of clients, particularly in response to the COVID-19 pandemic. Companies, having reevaluated their inventory management strategies during the pandemic, are now transitioning back to a “just-in-time” mentality. This shift prompts them to reconsider the size of facilities they require, with a trend towards downsizing, explained Ryor.

“As companies begin to look for top-notch, best-in-class buildings to operate out of, we are also seeing less focus on warehouses and distribution facilities and more of an investment in manufacturing facilities,” said Ryor. “This also includes an influx of mission-critical and data center projects.”

In terms of geographical areas of interest, Ryor points to Northwest Indiana as a hub where significant discussions and deals are taking place. Additionally, there’s a spotlight on smaller infill sites in and around downtown Chicago. Meanwhile, the west and southwest suburban regions remain attractive due to available land for larger distribution and manufacturing ventures.

Clayco is a formidable player in the industrial construction arena, boasting a comprehensive suite of services encompassing real estate, architecture, engineering, design-build and construction. With a legacy spanning more than three decades, Clayco has consistently delivered projects of the highest quality, earning the trust of clients across North America. Its commitment to innovation, efficiency and excellence has established Clayco as a frontrunner in the industry, with accolades from Engineering News Record reaffirming their stature as a top design-builder and contractor.

One project that stands out in Clayco’s pipeline is the CRG Cubes at ORD project in Franklin Park. This speculative building spanning 66,500 square feet is strategically located near O’Hare International Airport, promising to cater to the robust demands of the O’Hare market corridor. Set to be available in Spring 2025, this venture underscores the confidence and strategic foresight of Clayco amidst evolving market dynamics.

With strategic initiatives underway and innovative projects on the horizon, there’s a palpable sense of optimism permeating the Chicago industrial construction market. As stakeholders harness the lessons learned from past experiences and capitalize on emerging opportunities, the future of the market shines bright with potential.