Chicago Shows Resilience During Uncertain Economy

Chicago is the nation’s third largest intermodal center, thus its range of diverse industrial space demand remains relatively solid during national downturns. At a time when the city is faced with unfavorable market conditions its resilience is a valuable asset, although it recently saw a decrease in manufacturing activity for the first time in 11 months.

Employment conditions in Chicago rose 40 basis points from the end of 2007 to the end of the first quarter in 2008, marking the highest first quarter rate of unemployment in the city since 2005. Net absorption was posted at 2.6 million square feet, an increase from the previous quarter, while rental rates increased slightly and the vacancy rate measured 10.5%.

The economic outlook for Chicago’s future looks bright as proponents believe the completion of I-355’s South Extension will positively impact areas immediately surrounding the interstate. We anticipate job losses will end, and the metro area job base will continue to steadily increase for years to come. We also project there will be a gradual increase in new jobs over the next several years, reaching approximately 177,000 new jobs in total by 2012. We also expect absorption to remain steady and vacancy rates to decline by approximately 9% by 2010.

Our comprehensive report on the outlook for the U.S. industrial property sector is available for free download in the publications section at www.naiglobal.com

Dr. Peter Linneman is Chief Economist at NAI Global and Principal, Linneman Associates. He also serves as the Albert Sussman Professor of Real Estate, Finance, and Public Policy at the Wharton School of Business, the University of Pennsylvania.