After a slight setback this winter, Northwest Indiana's industrial real estate market has surged back to its highest point in years.
A recent NAI Hiffman report found the vacancy rate in industrial buildings space has dropped under 7 percent, down from a high of 12.11 rate in 2009. The region also has not seen so much new industrial space – more than 470,000 square feet – under construction since 2008.
The turnaround reflects an overall change of fortunes in the broader Chicagoland market, where more than 5.6 million square feet were absorbed between April and June, the highest amount since the market recovery began four years ago.
"Chicago's real estate markets – both in the industrial and office sectors - have crested a ridge. We've seen several consecutive quarters of positive absorption; after several years of struggle, we're coasting and picking up speed," wrote John Picchiotti, who is chief operating officer of the real estate firm. "Many owners and investors made shrewd moves to position themselves for these events, and they'll use their momentum to carry them forward into the next phase."
The overall industrial vacancy rate in greater Chicagoland fell to 8.09 percent last quarter, a drop of 18 basis points. NAI Hiffman said the rate reflects a healthy, active market that should make landlords, investors and developers confident.
Rental rates have increased. Investors have snapped up more property. Development has surged with 11.4 million square feet of industrial space under construction and 4 million in new construction completed.
Businesses bought or leased out 108,828 square feet of space in the Northwest Indiana submarket in the second quarter, causing the vacancy rate to drop by 30 basis points. Most notably, steel manufacturer Heidtman Steel Products moved into the East Chicago Enterprise Center at 4407 Railroad Ave.
The region's industrial vacancy rate now stands at 6.68 percent, which is more than 5 percent lower than the height it reached during the Great Recession.
A rate below 7 percent is generally considered healthy, and that has caused construction to pick up, the report found.
The market is most active in modern business parks, such as in Hobart, Munster, Merrillville and Portage.
Currently Valporaiso-based Urschel Laboratories Inc. is building a 350,000-square foot headquarters at the master-planned Coffee Creek Center off of Interstate 94 in Chesterton. Munster Steel, which is also relocating, is constructing a 123,000-square-foot facility in Hammond's West Point Industrial Park.
MonoSol, Pratt Industries, Superior Truss & Panel Inc. and Illini Hi-Reach also have broke ground or intend to break ground on an additional 628,000 square feet of industrial space.
The sales market is also robust. Industrial Realty Group LLC bought two Hammond buildings: a 267,093-square-foot property at 4527 S. Columbia Ave and a 249,980-square-foot building at 2531 S. Columbia Ave.
"Companies continue to be drawn to the economic advantages Northwest Indiana offers over neighboring areas of Illinois," the report noted. "Nine options for 100,000 SF or larger contiguous blocks of space remain available, suggesting that Northwest Indiana can support additional tenant demand."