With demand growing for warehouse distribution space in the Chicago area’s approximately 1 billion-square-foot industrial property market, Liberty Property Trust will break ground Thursday on two such buildings in Aurora.
The $30 million project at its Liberty Business Center near Interstate Highway 88 will total 800,000 square feet. And the Malvern, Pa.-based real estate investment trust is so confident about this market that the larger building, a 600,000-square-foot warehouse, is being built on speculation for occupancy this fall.
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“Business is picking up, and companies want space near Chicago and the airport,” explained Don Schoenheider, a vice president at Liberty, which has a market capitalization of $3.9 billion.
The risk might be minimal. Earlier this month Duke Realty Corp. of Indianapolis leased an 805,000-square-foot warehouse that it built on speculation at Park 55 near I-55 in Romeoville to Kimberly-Clark Global Sales Inc., said Andy James, a senior vice president at Duke, a REIT with a market capitalization of $4.6 billion.
“We’ve had a great deal of success around the metro area,” said James.
Not to be left out, San Francisco-based AMB Property Corp. is building a $26 million warehouse facility near O’Hare International Airport. It will invest another $80 million to buy and build more property in that submarket, and will purchase a 70-acre site in Minooka for a 1 million-square-foot speculative project, said Vice President Jim McGill.
“Rents are moving up in mature markets like O’Hare, even though there’s still some downward pressure around Interstates 55 and 80,” said McGill.
“Last year was good,” McGill said, “and we expect this year to be stronger even though it started slow.”
In 2005, industrial users in the area occupied 19.4 million square feet more than they vacated, compared with 13.7 million square feet a year earlier.
Now, about 12.6 percent of the region’s industrial supply is available, and 10 million square feet of new space is being developed, said David Twist, research director for AMB, which has a market capitalization of $4.2 billion.
South Loop rentals: An increasingly rare commodity is now being offered for sale by BlackRock Realty and Security Properties: a moderately priced 343-unit rental apartment building at 1212 S. Michigan Ave. in the South Loop.
With many apartment buildings already, or soon to be, converted to luxury condominiums, and rising interest rates spooking some potential buyers, “demand will be great because it’s in a good location, there’s very little downtown product like this on the market, and it isn’t high end,” said Ron DeVries, vice president of Appraisal Research Counselors.
The 25-year-old, 30-story building, which recently underwent a $9 million renovation, is expected to fetch about $65 million, or $275 a square foot, said the sale’s broker, Matthew Lawton, a senior managing partner at Boston-based Holliday Fenoglio Fowler LP.
“We’re delivering into a strong market,” he said of the building, which BlackRock acquired in 1998.
Buck raising fund: John Buck Co. raised $200 million for the first round of financing in JBC Fund III and plans to raise another $150 million for it by year’s end. With equity capital from its third and largest fund, the Chicago-based developer plans to buy and build office and residential properties in major U.S. cities, including New York, Washington, Chicago and Los Angeles, said Chief Financial Officer Kent Swanson.
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