O’Hare is Now a Landlord’s Market

CHICAGO—Newmark Grubb Knight Frank just completed a 50,000-square-foot lease at 1240 Garnet Dr. in suburban Northlake near O’Hare International Airport on behalf of Midwest Industrial Funds, the property’s owner. Although the industrial building was vacant when MIF purchased it just last year, this new lease, the property’s second, brings its occupancy up to 100%.

“We got a very good market rent that was a good deal for the landlord,” NGKF’s Adam Marshall tells GlobeSt.com. Although he can’t give details on this particular transaction, he does say that overall the O’Hare submarket is “now a landlord’s market,” and owners like MIF don’t need to grant many concessions to fill up buildings that hit the market.

The Garnet property is a 101,000 square-foot distribution and light industrial facility. MIF renovated the facility with new offices, energy efficient lighting, fire sprinkler upgrades, as well as upgrades to the roof, exterior, loading area and parking lot. The property offers access to multiple expressways and direct frontage on I-294. Built in the early 1980’s, the building features 24’ clear ceilings, nine docks and ample parking.

General Insulation was the first new tenant and leases the north portion of the property. The most recent lease for the remaining half was signed to Mygrant Glass Co., a privately-owned auto glass wholesaler with over 60 locations nationwide. Marshall and co-broker, Jeff Fischer, executive vice president of NAI Hiffman, represented MIF in the lease negotiations and building acquisition.

“This building definitely leased up quickly,” Marshall adds. “We got the first deal done right after they closed the property,” and this one just six or seven months later. Overall, the vacancy rate surrounding the airport has just sunk to 7.4%, and “that’s the lowest rate we’ve seen since the end of 2007.” The rate peaked at 12.8% in early 2010.

As reported in GlobeSt.com, the escalating demand has pushed developers to break ground on a number of projects in the immediate area. “We’ve had a first round of speculative construction that has delivered about 500,000 square-feet,” says Marshall, all in the last seven or eight months and “with very few vacancies left.” Furthermore, developers currently have several million square feet of new industrial space in the pipeline, although some of the deals for these projects will probably fall through.

Probably the most impressive development in the O’Hare submarket has been the growth in rent. According to Marshall, average gross asking rents have increased 18.5% since 2012. Furthermore, the area has still not hit its peak. “We’re still below the asking rents seen prior to the recession.”