Why suburban Chicago may see more office-to-industrial conversions
Industrial remains one the strongest building types in commercial real estate in the Chicago market as continued positive net absorption and the rise of e-commerce continues to shift retailers' need for space and push industrial demand.
According to Newmark Research, of the 505 leases which began in 2022 there were nearly 29 million square footage and 69% of industrial lease volume. Direct deals accounted for 69% of the total. According to Adam Marshall, senior managing direct at Newmark's Chicago office: "You can see that there is clearly strong demand as people move out of the city into O'Hare or North DuPage. And the surrounding markets are very high in demand." These are markets where it is difficult to find a greenfield location to develop. These properties are being redeveloped and bought. As the market continues to struggle, this demand has caused some suburban office properties to be reimagined. The market's biggest drivers of growth and demand are still last-mile distribution centers. Office space must have more than 7 acres, a single tenant or high vacancy, Class B or lower classification and be close to major highways. Office redevelopment is not just for industrial uses. It also includes multifamily, retail and data center uses. According to JLL, approximately 464 acres of land in suburban Chicago and 4.8 Million square feet of office space were purchased with the intention of redeveloping.