When the Chicago Plan Commission in April approved a new warehouse in West Town, there was excitement in the air.
The commission, Chicago’s review agency for large-scale developments, heard from Steve Simmons, director of business and economic development at North Branch Works, who called the project “exciting.” Maurice Cox, the city’s commissioner of planning and development, said, “There are a lot of aspects for this that are intriguing.”
The upbeat tone continued with North Branch Works blasting out an email about the project. Then there was the groundbreaking in October, with shovels polished for the ceremonial first digs. Several speakers took turns at the podium.
Fair enough, but was it enough to make somebody ask, “What’s so exciting about a warehouse?”
These things have a bad name in a lot of places. They are associated with heavier traffic, polluting trucks and physically taxing jobs that might not pay that well. But they have worked their way deeply into our buying habits. Within the city’s central core, there is a growing population of people and businesses demanding quick deliveries. Some of us want our stuff within a few hours.
With that in mind, the warehouse in question aims to take service up a notch — one floor higher, to be exact. The developer, Logistics Property, said it is the first multistory warehouse in Chicago. Its floor area would contain about 590,000 square feet.
Amazon has built multilevel arena-sized warehouses around the area, but the loading docks are on the ground. For the project in West Town, the trucks have access to docks on both levels, courtesy of generously sized ramps. The design squeezes more productivity out of an 11-acre site.
The development lists its address as 1237 W. Division St., but most frontage and some vehicle access will be on Elston Avenue. The property is an old Peoples Gas site at the southwest corner of Division and Elston. That puts it near businesses that cluster on Goose Island, along Elston and, a bit further, near the Kennedy Expressway.
Aside from allowing trucks more room to rumble, the warehouse offers other points of design flair. It includes 50,000 square feet for offices, a potential bonus for some users that adds glass to a concrete-and-brick façade. It brings variety to the visuals. There would be a landscaped wall. The warehouse would be connected to a five-story parking garage, which usually signifies ugliness. But the developers have added screens for some of the decks that promise murals — artwork unknown at this point. It was enough to impress city planners and move Cox to say that the project “brought a level of strategy and innovation that I welcome.” The architecture is by the firm Ware Malcomb.
Simmons said the warehouse will provide an important service for businesses in the areas covered by his industrial retention group. Logistics Property, a Chicago-based company with buildings across North America, estimated the warehouse will host 600 to 800 permanent jobs, although that depends on who ends up filling the space.
And that’s a cloud in this otherwise sunny picture. The company is building “on spec,” or without any tenant commitments. It’s been a common strategy among industrial builders for a market of untiring demand. But there are finally signs of a slowdown. Amazon, the driver of much of the attention, has been cutting back on its property intake, reportedly closing warehouses in Mundelein and Elgin and scrapping plans in Crystal Lake and Hoffman Estates.
“The market was like a rocket ship,” said Mike Senner, executive vice president at the Colliers real estate firm. “Nobody saw any end to it in sight.” But now the Federal Reserve’s interest rate hikes and fears of a recession are taking hold, he said. “Some people will shelve their projects. Others will wait out the recession,” Senner said.
Despite the warning signs, Senner praised the project on Division for its ambition, noting that it needs only one or two tenants who want proximity to downtown.
The latest Colliers analysis of the region’s industrial market showed the vacancy rate at a record low 4.54% in the third quarter. But its report said vacancies will rise in 2023 because a record 48 industrial projects are under construction. Joining their ranks soon will be Dermody Properties, which bought the old Allstate campus in Glenview. Dermody said last week it will start work on five buildings totaling 1.2 million square feet, just the first phase of a planned 10-building logistics park.
Plans call for the two-story building on Division to be delivered in the summer of 2024. The developer said it has secured a $150 million construction loan from Wells Fargo Bank, Inland Bank and Trust, and Associated Bank.
Jones Lang LaSalle was hired to find tenants. It produced a brochure headlined, “Second City, meet Second Story.” Every little wit helps.
