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The Southland’s booming warehouse construction market shows no signs of slowing as developers continue putting up big boxes to meet demand, an economic leader told a group of investors Friday.
Doug Pryor, president and CEO of the Will County Center for Economic Development, said a lack of supply has driven industrial occupancy to record levels and caused rental rates to skyrocket.
“We’re full,” Pryor told an audience of about 300 gathered in the ballroom of a Joliet hotel for an annual meeting. “As you might imagine with supply and demand, when we see a lot of demand and limited supply, prices are going to go up.”
Industrial lease rates that remained relatively steady over the past decade shot up to $8.14 per square foot in 2022 from $5.49 in 2020, Pryor said. That’s a 48% increase, and yet the industrial occupancy rate stands at a record 97%.
“This is a stunning number,” Pryor said. “When you see the lease rates start to go up, something else happens. Developers, even in a borrowing challenged environment like we’re starting to be in, they want to build more because these rates make the numbers work, and that’s what we’re seeing.”
Since its founding in 1981, the Will County CED has promoted business growth throughout the region and tracked results. This year’s numbers reflect surprising strength that illustrate how the Southland continues to outpace growth in the state and nation.
To put the 97% industrial occupancy rate figure in perspective, the county’s rate has averaged just 91% over the past decade, Pryor said.
“That difference is 12 million square feet of space that is leased up that we wouldn’t expect to see in a normal market,” he said.
In addition to Amazon and other online retailers occupying fulfillment and distribution centers in the industrial sector, other types of businesses are thriving as well. Retail spaces in Will County are 95% occupied and office spaces are 94% occupied.
“I know this is counter to the narrative you’re hearing, but office occupancy is at a record high,” Pryor said. “We are not nearly impacted by the negative impacts of work from home.”
Workers are making items in factories throughout Will County, with manufacturing accounting for 17.5% of the region’s total economic output, Pryor said. Lion Electric has begun rolling electric school buses off an assembly line at its new plant in Joliet.
The Canadian manufacturer of electric vehicles considered various sites in several states before choosing to build in Illinois, said U.S. Rep. Bill Foster, D-Naperville.
“We should be proud we won that competition,” Foster said. “Michigan, Texas and Georgia were very formidable opponents and we defeated them all.”
Congress has passed significant legislation during President Joe Biden’s first two years in office, Foster said, including the American Rescue Plan Act, the Inflation Reduction Act and the Infrastructure Investment and Jobs Act.
“These historic investments may have been passed in the last two years of Congress, but these investments will be playing out over the next decades to the benefit of Will County and businesses around the country,” Foster said.
Two factors seemed to matter most when convincing Lion Electric to locate in the southwest suburbs, Foster said.
“Part of the pitch we made was that in this area we have a highly skilled workforce ready to go and we have a second to none transportation infrastructure,” Foster said.
Will County is investing $10 million of rescue act funds to work with Prairie State College in Chicago Heights, Governors State University in University Park and other area institutions of higher education to prepare students to enter the workforce as teachers and nurses to meet surging demand in those fields, Pryor said.
“There is a stunning amount of work happening in the higher education space,” he said.
The labor market remains tight, Pryor said. Contrary to popular belief, young people are eager to work, he said, but a staggering number of people 55 years and older have opted to leave the workforce.
“I get asked this question a lot,” Pryor said. “When is it going to get better, what happened with the labor force?”
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Despite growth in every sector, including residential housing permits and population, Will County’s workforce has dwindled to 360,000 from 380,000 three years ago, Pryor said.
“That’s a significant change when you consider not only is it lower than it was a year ago, but our population has grown a little bit,” Pryor said. “We would have expected some natural growth in that time.”
Will County’s unemployment rate is near a historic low of 4% and median household income has climbed to more than $90,000, he said.
“We have a situation where we have a lot of demand for labor,” Pryor said. “There are a lot of jobs out there. There’s not a lot of supply for labor. What’s going to happen to wages? They’re going to go up, and that’s what we’ve seen.”
The average worker in Will County is earning $1,076 per week now, up 16% from $927 in 2019, Pryor said.
“We’re seeing wage growth in almost every sector,” Pryor said. “In economic terms we always say prices change but wages are sticky, they stay up because people will not accept a lower wage. This will persist.”
Ted Slowik is a columnist at the Daily Southtown.