Key Takeaways:
Sustained Low Vacancy: Holding steady at 5.5%, below both its pre-pandemic average and the national average.
Stable Demand Amid Leasing Slow Down: Net absorption of 8.5M Sq. Ft. in the past 12 months, but new supply continues to outpace demand.
Controlled Development: Only 1.1% of total inventory is under construction, setting Chicago apart from markets facing potential oversupply.
Rent Growth: Up 3.3% YoY, supported by limited new supply and Chicago’s prime logistics infrastructure.
Sales Activity Rebounding: Transaction volume remains low but is showing signs of recovery.
Chicago Industrial Market Overview:
The Chicago industrial market is demonstrating resilience despite a decline in absorption and leasing momentum. With 15.7M Sq. Ft. of new deliveries in the past year and only 8.1M Sq. Ft. absorbed, supply slightly outpaced demand. However, the vacancy rate remains below pre-pandemic levels and well under the national average of 7.0%.
With O’Hare International Airport consistently ranked among the top 20 cargo airports globally, Chicago’s nation-leading intermodal infrastructure remains a key driver of long-term demand for logistics and distribution. Unlike markets facing an oversupply of industrial space, Chicago’s restrained development pipeline is a stabilizing force, limiting dramatic shifts in vacancies.
Source: CoStar Group (2025)
Leasing & Demand Trends:
Chicago’s 12-month move-in rate hit 8.5M Sq. Ft. thus far in Q1 2025, keeping it among the top 10 U.S. markets for demand. Vacancy stands at 5.5%, still 100 basis points below pre-pandemic averages.
Speculative supply pressures are easing, with less than 35% of the 14.4M Sq. Ft. under construction still available, though recent completions have a 60% availability rate. Infrastructure-driven demand remains Chicago’s strength, with major projects like Uline’s 1.4M Sq. Ft. Kenosha DC and Expeditors International’s full-building lease in Melrose Park.
Older properties continue to struggle, with 9.3M Sq. Ft. of absorption losses, while properties built between 2021-2024 absorbed 14M Sq. Ft.
Source: CoStar Group (2025)
Construction & Supply Pipeline:
New construction has tapered off significantly. Only 1.1% of Chicago’s industrial inventory is currently under construction, far below national trends. Developers are cautious, favoring pre-leased and built-to-suit projects over speculative builds. The slowdown in new deliveries should help keep vacancy levels stable, even amid slower demand growth. Moving forward, the slowdown has the potential to be advantageous as our market does not run the risk of oversaturation.
Source: CoStar Group (2025)
Rents & Pricing:
Chicago’s industrial rent growth outpaced the national average in 2024 for the first time in over a decade, with a 3.3% YoY increase so far in Q1 2025, matching pre-pandemic trends but well below the 8.3% YoY rental rate surge in late 2022.
Tight vacancy (5.5%) and availability (8.3%) keep rent growth strong, both below pre-pandemic levels and national averages (7.0% vacancy, 9.3% availability). Market asking rents average $9.70/PSF, with flex spaces at $15.00/PSF and small bay spaces at $11-$12/PSF. Large leases range from $5-$8/PSF, depending on location and property age.
Recent deals include ShipBob’s 264K Sq. Ft. lease in North Aurora at $7.53/PSF and AGS Technology’s 144K Sq. Ft. expansion in Elk Grove Village at $8.25/ Sq. Ft. Big-box spaces in oversupplied areas, like Kenosha East, are struggling, with rents at $5.50-$5.75/PSF.
Source: CoStar Group (2025)
Investment & Sales Market:
Sales volume reached $4.2B over the past year, recovering from prior lows but still the second lowest in a decade when adjusted for inflation. Logistics assets dominated, accounting for $2.6B in transactions.
Institutional investment surged in late 2024, with a 40% increase in buyer activity. Major deals included Ares Management’s $46.3M purchase of a 356K Sq. Ft. Aurora distribution center ($130/PSF) and Nuveen’s $35.8M acquisition of a 271K Sq. Ft. corporate center at a 5.44% cap rate.
Specialized properties led high-value deals, including HMC Capital’s $439.7M purchase of a 189K Sq. Ft. data center in Elk Grove Village ($2,323/PSF) and Gaming and Leisure Properties’ $250M Tribune printing plant acquisition for redevelopment into the esteemed Bally’s Casino.
Despite strong absorption and stable rent growth, low-for-sale inventory limits transaction volume. However, with $392.5M in maturing industrial loans in late 2025, more sellers may enter the market, creating new opportunities.
Source: CoStar Group (2025)
Outlook for 2025:
Chicago’s industrial market is entering a period of slower, more sustainable growth. While demand has softened, the market’s fundamentals—low vacancy, well-paced construction, and strong infrastructure—will likely prevent major disruptions. Rent growth is expected to continue at a moderate pace, and the investment market should see gradual improvement as interest rates stabilize.
Cawley CRE – Your Submarket Specialists:
O’HARE:
The O’Hare Industrial Submarket is holding strong, with 1.4M Sq. Ft. of new deliveries and 980K Sq. Ft. in net move-ins over the past year, plus a low 4.1% vacancy rate. Data centers are fueling growth, driven by Elk Grove Village’s enhanced power grid and tax incentives, attracting major developments like Prime Data Centers’ three building 1M Sq. Ft., 175 megawatt campus with the first building set to open in the first half of 2025. Asking rents remain strong at $11.10/PSF, about 15% above the Chicago average, reflecting the market’s desirability. Sales activity is robust at $678M, with high-profile transactions, including HMC Capital’s $439.7M purchase of a 189,000 Sq. Ft. premier data center, with tenant DataCenterHawk to take occupancy during the first half of 2025. With limited land availability preventing oversupply, O’Hare’s industrial market is set for continued stability and long-term demand.
WEST NORTH COOK | WEST SUBURBS:
In West Cook North, vacancy is 5.6%, with 1M Sq. Ft. absorbed over the past year. Asking rents grew 3.0% YoY to $9.72/PSF. Speculative development is limited, and data center demand is rising, benefiting from proximity to Elk Grove Village. Sales volume reached $105M, but investor interest is slowing due to aging inventory.
In West Suburbs, vacancy is 3.3%, with -267K Sq. Ft. net absorption as older properties struggle to retain tenants. Rents are up 3.4% YoY to $11.30/PSF, among the highest in the region. No new construction has been completed, but 32K Sq. Ft. is underway. Sales volume hit $214M, nearly doubling from early 2024, despite challenges from outdated inventory.
Both markets face aging stock and shifting demand, but tight vacancy and rising rents support stability through 2025.
I-80 CORRIDOR | SOUTH I-55 CORRIDOR | SOUTH COOK:
The Joliet, South I-55 Corridor, and Near/Far South Cook Industrial Submarkets offer a mix of large-scale logistics hubs, cost-effective distribution space, and steady investor interest.
In Joliet, vacancy sits at 8.6%, with net absorption slowing to 480K Sq. Ft. after major tenant move-outs, but 3.2M Sq. Ft. of new deliveries and 1.7M Sq. Ft. of leasing in newly built properties show ongoing demand. Asking rents remain competitive at $7.90/PSF, while sales hit $308M, led by STAG Industrial’s $74M Cherry Hill portfolio acquisition.
The South I-55 Corridor, offering strong infrastructure and highway access, saw vacancy rates at 5%, below pre-pandemic levels, despite -570K Sq. Ft. in net absorption. 670K Sq. Ft. was delivered, with 70% still available due to a great deal of space built on speculation, and 290K Sq. Ft. primarily comprised of logistics space is under construction. Asking rents grew 3.5% YoY to $8.90/PSF, in line with Chicago’s market. Sales totaled $512M at $112/PSF, with investors showing confidence, highlighted by AMSTAR’s $106.5M portfolio purchase.
The Near South and Far South Cook submarkets offer affordable industrial space, with vacancy rates and asking rents of 5.1% – $9.80/PSF and 4.6% – $7.20/PSF, respectively. Sales volume reached $104M in Near South Cook and $8M in Far South Cook, with a combined average price of $79/PSF offering cost-effective investment opportunities compared to Chicago’s $96 PSF average.
SOUTH CHICAGO:
The South Chicago Industrial Submarket remains a legacy manufacturing hub with 121M Sq. Ft. of industrial space and a low 5.1% vacancy rate. While net absorption was modest at 21K Sq. Ft., specialized industrial space remains in high demand, with a tight 2.5% vacancy rate. Development is picking up, with 540K Sq. Ft. under construction, including IBM and PsiQuantum’s 400-acre, 59M Sq. Ft. quantum computing campus on the former US Steel site, signaling a shift toward tech-driven industrial growth.
Asking rents average $9.65/PSF, and sales hit $226M, with pricing 20% below the Chicago metro average, making it an affordable investment option. With state-backed incentives and infrastructure improvements, South Chicago is steadily evolving into a modern industrial hub.
NORTH I-55 & NEAR SOUTHWEST SUBURBS:
The North I-55 Corridor and Near Southwest Suburbs remain key industrial hubs, offering 57M Sq. Ft. of space with strong investor interest and steady rent growth. In North I-55, vacancy is 7.1%, with -150K Sq. Ft. of net absorption and no new construction underway. Rents average $10.40/PSF, and sales totaled $28.8M at $106/PSF, above the metro average. In Near Southwest Suburbs, vacancy is 3.8%, with -514K Sq. Ft. absorption and no new construction. Rents sit at $8.50/PSF, and sales reached $27M at $141/PSF, highlighting investor confidence. With limited new supply and solid rent growth, both markets remain stable industrial players.
NORTH CHICAGO:
The North Chicago Industrial Submarket is facing rising vacancy (9.5%) and slow leasing activity, with -671K Sq. Ft. in net absorption over the past year. New deliveries totaled 1.2M Sq. Ft. largely due to the nation’s first non-coastal five-story distribution center, which remains mostly vacant.
Asking rents grew 3.1% YoY to $12.80/PSF, above the metro average, but tenant demand is shifting, with legacy industrial properties being repurposed for retail and recreational uses. Sales volume fell to $110M, down 35% year-over-year, with an average price of $63/PSF, as investors focus on redevelopment rather than traditional industrial acquisitions. With limited new development and ongoing tenant movement, North Chicago’s industrial market remains in transition, with high vacancy and repurposing trends shaping its future.
I-88 WEST | CENTRAL KANE/DUPAGE | NORTH DUPAGE:
In I-88 West, vacancy is 3.5%, with 960K Sq. Ft. absorbed and 1.7M Sq. Ft. delivered. 2.1M Sq. Ft. is under construction, and rents grew 3.3% YoY to $8.83/PSF. Leasing demand is strong, but speculative development pushed availability to 8.8%. In Central Kane/DuPage, vacancy is 4.2%, with 662K Sq. Ft. absorbed and 973K Sq. Ft. delivered. 460K Sq. Ft. is under construction, and rents are up 3.3% YoY to $8.90/PSF. Newer properties are driving demand, while speculative supply has eased. In North DuPage, vacancy is 4.8%, but absorption fell to -821K Sq. Ft. due to legacy space move-outs. 57K Sq. Ft. was delivered, with no new construction underway. Rents increased 3.5% YoY to $9.51/PSF, while sales hit $155M but remain below past levels.
LAKE COUNTY:
In North Lake County, vacancy is up to 6.6%, surpassing pre-pandemic levels, with 386K Sq. Ft. in net absorption over the past year. Asking rents grew 3.2% YoY to $9.10/PSF, slightly below the metro average. Sales volume hit $49.9M, with logistics properties driving most transactions. The aging inventory (built pre-1976) limits tenant interest, but recent leasing activity has improved momentum.
In South Lake County, vacancy is at a 20-year low of 5.0%, with 564K Sq. Ft. absorbed over the past year. Asking rents increased 3.3% YoY to $10.76/PSF, and sales totaled $219M, led by logistics transactions. Older properties dominate the market, but demand remains stable due to strong transportation access and lower business costs compared to Cook County.
KENOSHA:
The Kenosha East Industrial Submarket has expanded rapidly, with 1.4M Sq. Ft. of new deliveries in the past year, but high vacancy (12.2%) remains a challenge. Absorption reached 2.3M Sq. Ft., aided by a 30% increase in leasing velocity in late 2024.
Asking rents grew 3.3% YoY, in line with Chicago but 20% below its average. New construction (960K Sq. Ft.) is mostly pre-leased, and ongoing infrastructure improvements, including I-94 expansion, enhance market appeal. Sales volume hit $93.7M, far below 2022’s peak of $497M. Investor interest is muted due to high availability rates, though owner-occupiers remain active buyers.
INDIANA:
The Indiana Industrial Submarket continues to benefit from low taxes and proximity to Chicago, attracting logistics and manufacturing tenants. Vacancy is at 3.9%, with 1.9M Sq. Ft. absorbed in the past year. Asking rents grew 3.1% YoY to $8.80/ Sq. Ft., remaining below Chicago’s metro average.
New deliveries totaled 810K Sq. Ft., but demolitions of 2M Sq. Ft. kept net inventory growth negative. 820K Sq. Ft. is under construction, mainly logistics and specialized industrial space. Sales volume reached $20.9M, with logistics assets leading transactions at $55/PSF. While investor activity remains muted due to high capital costs, long-term fundamentals remain strong, supported by low costs and a robust transportation network.
GRAND RAPIDS:
The Central Grand Rapids Industrial Submarket remains strong with a low 2.0% vacancy rate and rising rents, up 4.0% YoY to $7.00/PSF. Tight supply has kept market fundamentals healthy, with logistics space at $6.10/PSF and flex at $16.10/PSF. Sales activity totaled $15.6M across 18 properties, and pricing remains stable at $54/PSF. While new construction is limited (39K Sq. Ft. underway), this has helped sustain rent growth and property values. With strong demand and low vacancy, Grand Rapids’ industrial market remains well-positioned for long-term stability.
Sources:
Chicago Department of Aviation. (n.d.). Cargo | O’Hare (ORD) and Midway (MDW) International Airports. https://www.flychicago.com/business/cargo/pages/default.aspx
CoStar Group. (2025). Market Report: Chicago – IL USA ) Industrial-Market-2025, Industrial Submarket Reports: O’Hare, Joliet Area, Central Grand Rapids, Central Kane, Far South Cook, I-88 West, Indiana, Kenosha East, Near South Cook, Near SW Suburbs, North Chicago, North DuPage, North I-555, North Lake County, South Chicago, South I-55, South Lake County, West Cook North, West Suburbs. Retrieved from CoStar Analytics.