This year, like the last, all eyes are on the Chicago industrial real estate market. One of the most promising in the country, it expects roughly 17.9 million square feet of new developments by the end of 2019. Investors have placed their bets, so it’s time for us to get a closer look.
For our latest Expert Insights interview, we sat down with Chad Buch, research manager at JLL Chicago, and discussed the market’s strengths and future, as well as some tips for commercial real estate professionals at the beginning of their careers.
Chad has been with JLL for seven years. He started out as an intern; now, he co-leads the firm’s Chicago Industrial Research team, working on a variety of transactions across 1.2 billion square feet in three states. His team produces in-depth market reports and tracks a multitude of CRE data points on leasing and sale activity, construction, investment sales and economic trends.
Q: Tell us a bit about yourself. What made you choose a career in CRE?
I grew up in Raleigh and went to school in North Carolina. My dad and other family members worked in real estate. I always thought real estate development was interesting. However, during the recession, there was not much happening in the space. As an undergrad, I earned a broker’s license and later got a master’s degree in Geography and Urban Planning at East Carolina University. I fell into the research side of it as a part of a work study. Then, I interned at JLL in Raleigh, where I started out in the research group. I moved up to Chicago after that summer, and the rest is history.
Q: What are some of the things that make Chicago such an attractive industrial market?
The vibrant megacity, a manufacturing legacy, diverse economic drivers, transportation hubs, rail line convergence, and intermodal service. We have land availability, which allows the market to grow and expand, as well as urban neighborhoods, where we are seeing the influence of changing delivery and fulfillment models. As one of the most important North American production and distribution hubs, we manufacture many different types of goods and products, and we move these goods on all modes of transportation – air, water, rail, truck, bike, crowdsourced drivers, and, in the future, perhaps drones.
Q: As we are nearing the end of Q3, do you have any insights about how Chicago performed this year?
The mid-year point has been surprisingly strong. And, while the numbers are not out yet, we really saw a big uptick in demand coming back to the market at the end of the summer, which will boost absorption at year-end. I think vacancy will hold steady due to the amount of new supply coming online. A couple big-box deals by some large household names in I-80 will really move the needle.
Q: Where do you see it going in the future?
Because Chicago is so diverse, we really think that any economic slowdown will not cause the market to crater. We expect vacancy to hover in a healthy 5 to 7 percent range across the market, although certain submarkets are in the 3 percent range. As long as absorption paces around our historical average of 14-17 million square feet per year, we will be happy. Tariffs are directly impacting some market participants on both the manufacturing and distribution sides, as well as many Midwestern agricultural businesses. However, as an inland port and major consumption point, we see steady demand for industrial space, and reshoring will definitely drive business for manufacturers and their suppliers.
Q: What are the challenges of working in one of the biggest industrial markets in the U.S.?
Chicago is the largest industrial market in the nation with 20 submarkets spanning three states, so there is a lot of deal flow and market information to track. This is also JLL’s largest industrial team in the country, so we are covering a lot of product and provide a variety of services, from institutional portfolio sales, agency leasing, local and national tenant representation, to representing mom-and-pop businesses on user sales and purchases, and land sales. Luckily, we collaborate with our research peers at other firms to share information and help stay on top of all the recent transactions and new availabilities. In addition, with such a robust capital markets environment, the ownership mix is constantly shuffling, and we are always tracking platform sales and working with capital sources when evaluating a market entry.
Q: Can you tell us a bit about the podcast you’re co-hosting, JLL Chicago Industrial Real Time?
I co-host this podcast with my research partners, George Cutro and Paul Marsh. Be sure to check us out on Soundcloud or the iTunes Podcast App. We have been doing this for almost three years now and released almost 30 episodes. We have some great help from our marketing team at JLL and have been expanding from recording with our research peers and JLL subject matter experts to using our network to reach new guests and clients. Interviews cover a lot of different aspects of industrial real estate, from railroads to international trade and local economic developers. Our most recent episode is a collaboration with Nareit.
Q: Do you have any advice for those looking to start a career in CRE?
Read as much as you can to stay abreast of activity in other neighboring markets around the Midwest and trends in the major national distribution hubs. Try and network with both younger and senior folks in the industry. Join local groups such as AIRE and NAIOP for monthly educational and networking events. Also, try to get out, see and tour as many buildings as possible.
Q: Any other insights you’d like to share?
Our research team is developing a lot of interactive tableau dashboards and mapping applications based off our national property databases, MarketSphere and Blackbird, to visualize tenant demand, development pipelines and leasing activity by size segment. We are collecting a lot of industrial property data points to help educate tenants we are representing and help investor clients make smarter leasing decisions. Also, feel free to download any of our comprehensive quarterly market reports or insightful whitepapers, all available on the JLL Chicago website.