I post this every year with less and less fanfare. But once again Chicago comes out on top on expansions and new business projects even without Rahm. The mayors office should be shouting this out.
https://siteselection.com/issues/202...e-no-other.cfm
TOP METROS OF 2020
From Site Selection magazine, March 2021
A Year Like No Other: U.S. Metro Area Rankings Expand and Reflect the Unusual Story of 2020
by Gary Daughters
TOP METROS of 2020
Amazon expansions in Chicago represent three times the square footage of Willis Tower, the city’s tallest skyscraper.
In a pandemic-driven season that saw a surge of e-commerce, our Top Metros feature a strong presence of logistics hubs like Chicago, the Midwest megaregion that returns to its spot at the top of our Tier 1 rankings.
Indeed, the Midwest makes a resounding statement with not just Chicago, but Toledo, Ohio, and Sioux City, Iowa, emerging from the nationwide pack as Tier 2 and Tier 3 winners, Toledo sharing its first-place finish with fellow first-timer Savannah, Georgia.
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Top Metros
Site Selection’s Top Metros rankings are based on accumulations of major capital investments in corporate end user facilities within a given core-based statistical area (CBSA) or metropolitan statistical area (MSA), as defined by the Census Bureau. Such areas can bleed across multiple jurisdictions, even states. Qualifying projects are tracked by Site Selection’s proprietary Conway Data Projects Database, which qualifies investments that meet at least one of three criteria: a minimum $1 million capex; 20 or more jobs created; or 20,000 sq. ft. or more of new space.
We divide metros into three tiers, according to population. It is our own calibration, but one you might see emulated elsewhere. Tier 1 metros are those with more than a million residents. Tier 2 populations range from 200,000 to 1 million, and Tier 3 metros have populations of less than 200,000. We address “Top Micropolitans” in a separate report found on p. 109 of this issue.
New Trends, and Chicago Still Wins
Ask around about the industrial real estate market in Chicago and you’ll hear words like “insane,” “staggering” and “wild.” In its year-end report, Colliers International characterized 2020 as a record year for Chicago, with
48.6 million sq. ft. (4,515,090 sq. m.) of new industrial leases signed, a 28% increase from 2019. That, in a pandemic year.
It’s indicative of a nationwide trend. As CBRE wrote in a year-end report:
“The U.S. industrial market cemented itself as the most in-demand commercial property sector in 2020, fueled by a large increase in e-commerce sales due to COVID-19 restrictions. Demand for industrial buildings of all sizes surpassed 2019 totals but [was] strongest in mega-distribution facilities of 1 million sq. ft. or more. The top 100 transactions last year totaled 103.8 million sq. ft., 17% above 2019’s total.”
“The institutional developers really started catching on about 24 months ago.”
— Trip Tollison, President and CEO, Savannah Economic Development Authority
Of the Chicago metro’s top-ranking 327 qualifying projects, a hefty 203 have a connection to warehousing and distribution, as e-commerce rocked the market. Another relevant piece of data: A total of 23 qualifying projects in Chicago can be attributed to just one investor: Amazon. Amazon’s investments in Chicago, totaling in the hundreds of millions of dollars, prompted Crain’s Chicago Business to declare in August that, “the Seattle-based e-commerce giant has emerged as the Chicago economy’s biggest growth engine.”
In addition to facilitating pandemic-driven demand for home delivery, Amazon’s spree is partly a matter of making up for lost time in Chicago, according to Scott Gibbel, vice president-Chicago for national developer IDI Logistics.
“Amazon was slow to establish their footprint in the Chicago market, initially servicing the area out of southeast Wisconsin and the far west suburbs,” Gibbel tells Site Selection. “Then, at the start of 2020 they really ramped up their local network, absorbing over 15 million sq. ft. [1,393,00 sq. m.] in the Chicago market. Why? Because there are over 9 million people in the Chicagoland area that are buying online and they didn’t have the infrastructure in place to support that.”
While notably prolific, Amazon is far from the only retailer beefing up its distribution capabilities in Chicagoland, a market within 750 miles (1,207 km.) of 42% of the nation’s population. Qualifying investments in warehousing and distribution came from Target (991,000 sq. ft./92,065 sq. m.); Walmart (192,000 sq. ft./17,840 sq. m.); Ace Hardware (180,000 sq. ft./16,720 sq. m.); Home Depot (120,000 sq. ft./11,150 sq. m.) and Lowe’s (115,000 sq. ft./10,689 sq. m.).
The pandemic, market analysts say, has accelerated momentum toward “just-in-case” inventory management, which means keeping extra product on hand for on-demand delivery, thus mandating expanded storage space.
“Remember,” says Gibbel, “we couldn’t buy paper towels and toilet paper. How is that possible? Retailers learned quickly how costly stockouts are, and they are strategically expanding their warehousing requirements to accommodate additional safety stock.”
That same fear of missing a sale, says Gibbel, prompted retailers to bite the bullet in 2020 and pay a premium for air shipments from overseas to avoid ocean shipping bottlenecks.
Chicago’s O’Hare International Airport thus handled $200 billion worth of freight in 2020, tops in the U.S.
“We can’t build warehousing quickly enough around O’Hare Airport,” says Patrick Turner, senior vice president, Colliers Chicago. “As quickly as these new facilities are being constructed, they’re being leased. If you have a good site close to the airport, you’re going to have a dozen interested parties fighting it out to see who can get control of it. The competition is that fierce.”
Third party logistics providers (3PLs) are “blowing it up” in Chicago, says Gibbel. The 3PL investments in the Chicago market totaled in the tens of millions of square feet, with SRC Logistics of Springfield, Illinois, leading the way with a 1-million-sq.-ft. (92,900-sq.-m.) warehouse in the Joliet submarket. Other such investments include those by: Geodis (400,000 sq. ft./3,160 sq. m.); Quality Custom Distribution (356,000 sq. ft./33,075 sq. m.); Champion Packaging and Distribution (283,000 sq. Ft./26,290 sq. m.) and Lineage Logistics (241,000 sq. ft./22,390 sq. m.).
IDI, says Gibbel, expects to break ground over the next 12 months on at least three speculative warehousing projects, a sign of the developer’s confidence in the continuing verve of the Chicago market, pandemic or no.
“The growth and adoption of e-commerce was already happening,” says Gibbel. “This pandemic just acted as an accelerant, and developers are adapting with users on supply chain solutions. This trend will help contribute to what many believe will be a record year for new leasing activity.”
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