In December 2024, in a blog entry on commercial real estate trends to watch during the upcoming year, we noted that the rise of e-commerce would likely fuel continued demand for industrial properties in 2025, according to The Commercial Real Estate Outlook for 2025 from U.S. News & World Report.
With the first half of the year behind us, it’s an opportune time to revisit that prediction and consider the current state of the Chicago industrial real estate market in particular. If you’re a commercial real estate investor considering your strategy for the next six months, here’s what you should know about the status of industrial real estate in the Windy City and what we might see during the second half of 2025.
Current Chicago Industrial Real Estate Market Snapshot
In the U.S. at large, industrial properties continue to perform well and enjoy a high level of demand, although the asset class is stabilizing following significant growth during the pandemic, according to JPMorgan Chase & Co. During Q1 2025, JPMorgan notes that asking and effective rents for industrial properties nationwide increased by 0.3 percent, and new construction has decelerated. Since Q3 2023, vacancies have stayed at or over 6.0 percent nationwide.
Judy Guarino, managing director of Commercial Mortgage Lending at Chase, describes the industrial real estate market as resilient, despite economic pressures and uncertainty.
“Despite the volatility in the macroeconomic landscape, driven by interest rate and trade policy uncertainties, industrial properties near ports remain vital,” Guarino said in an article on the JPMorgan Chase & Co. website.
In Chicago specifically, the industrial market is adapting to a “new normal,” according to an REjournals article published in early June. Notable trends to watch in the Chicago industrial real estate space include the following, according to the June article and a March 2025 REjournals article on the forecast for Chicagoland:
- Developers are turning away from speculative construction.
- Tenants and developers are favoring small and mid-sized properties.
- Renewal leasing activity remains high.
- Cold storage is growing in popularity.
- Infill corridors such as O’Hare, I-55 and Central DuPage continue to attract institutional interest.
- Demand continues to increase for data center space due partly to the rise of artificial intelligence.
- As of March, Chicago had strong absorption and vacancy rates under 5 percent.
Key Factors Influencing Demand for Industrial Properties
The city’s status as a logistical hub with access to international transportation and trade systems makes it a perpetual hot spot for commercial real estate investment. However, there are various factors in the mix that influence demand for industrial properties in the Chicago area. Here are some elements that could have a significant impact on industrial real estate in the Second City and beyond, according to REjournals and industry experts.
- Economic pressures such as interest rates, tariffs and inflation (including rising construction costs).
- Continued e-commerce growth.
- Governmental and corporate sustainability initiatives.
Only time will tell what the rest of 2025 has in store for the Chicago industrial real estate market. Still, REjournals reports that the area’s absorption trend is positive, and many anticipate that deferred leasing will convert into signed deals over the next six months.
If you want to explore Chicago industrial property for sale, the Avalon Realty Associates team would be happy to help with our real estate brokerage services. Call 847-506-1000 or email info@avalonreal.com to talk to our team today.
You can also browse our property listings and check out our previous blog entry, “What to Look for in an Industrial Property.”