State of the Box Market
When the pandemic struck, many companies had to close their doors and ask their employees to begin working from home in a scramble to protect lives and livelihoods. The virus has impacted almost every part of everyday life across the planet. The future of many industries was unknown including the industrial real estate market here in the Chicagoland area.
ATMI Precast kicked off 2020 with a full industrial backlog and hit the ground running in January 2020. However, come mid-March 2020 the spread of COVID-19 impacted life as we know it which translated to an immediate loss of 25% of our backlog. Business for the remainder of the year and into 2021 was unpredictable.
To our good fortune, the Chicago industrial market roared out of the gates in 2021 despite the ongoing disruptions caused by the pandemic. Industrial demand is measured by net absorption and new leasing volume. Both indicators returned to pre-pandemic levels matching the impressive net absorption recorded during the first quarter of 2020. The total vacancy clocked in at a healthy 5.76%. This was the first decrease recorded since the first quarter of 2020. The vacancy rates in eight (8) of the twenty-two (22) industrial submarkets tracked are near all-time lows.
Leasing activity remained strong at the start of 2021, as over seventeen (17) million square feet of deals were recorded. This is the third consecutive quarter in a row this figure has increased. There were two (2) deals signed with more than one (1) million square feet. As a complement to the sustained leasing velocity found in the Chicagoland industrial market, the development pipeline remains robust. The construction activity remains strong as nearly 23.6 million square feet of industrial properties are recorded in the market, spread across fifty-nine (59) developments. Net absorption in the first quarter topped over 2.5 million square feet.
There were more than seven (7) million square feet of industrial product delivered across the Chicago metropolitan area during the first quarter of 2021. This is about 1.4 million square feet more than the industrial market delivered this time last year. Build-to-suit projects compromised 55.7% in the quarter while the remaining 44.3% were speculative developments.
Total first quarter 2021 industrial investment sales volume in the Chicago market is estimated at $862.3 million, a 67% decrease from the pre-pandemic quarterly sales volume record reported in the first quarter of 2020. Twenty (20) transactions occurred during the first quarter totaling 10.2 million square feet across thirty-three (33) buildings.
The investment community has continued to increase capital allocations to industrial real estate, creating more competition and pushing pricing to record high levels. Thus far, sales in 2021 represent a 21.4% increase in price per square foot value from the same time in 2020, with an average sale price per square foot of $84.87.
As the leader in wall panel capacity and delivery in the Chicagoland market, we continue to look ahead. ATMI Precast is committed to doing what we can to meet this increased demand, satisfy our customers, and keep providing precast solutions!
Planning your next project? Contact us today. We would love to work with you!
