Economic Overview
Despite a challenging economic environment, the Chicago region continued to exhibit signs of stability. The unemployment rate decreased by 60 basis points (bps) year-over-year (YOY) to 4.7% in Q3 2025. Q4 2025 employment data has been delayed due to the government shutdown. Chicago’s labor pool remained steady YOY, with nonfarm employment at 3.8 million individuals. As of September 2025, Chicago's industrial-using labor force reported moderate YOY declines, with jobs in the transportation and utilities sector down 0.8% and manufacturing employment down 1.1%.
Demand: Leasing Activity Increases
Chicago’s industrial market experienced heightened demand during Q4 2025. New leasing totaled 9.9 million square feet (msf) during the quarter, up 69.4% YOY. This brought the 2025 annual total to 36.8 msf, representing a 33.6% increase compared to 2024 year-end totals. New leases for spaces 500,000 square feet (sf) and greater reached 8.2 msf in 2025, up 118.3% from the 3.8 msf of activity in 2024, highlighting sustained demand for big-box facilities.
The overall market vacancy rate rose 20 basis points (bps) YOY to 4.7%, remaining unchanged quarter-over-quarter (QOQ). Of the 19 submarkets, nine recorded a YOY decrease in vacancy. Submarkets with notable declines in vacancy included Southeast Wisconsin and Northern Fox Valley, which recorded drops of 250 bps to 7.6% and 160 bps to 5.8%, respectively. Vacant sublease space decreased 8.1% YOY to 3.9 msf in Q4 2025, now comprising just 6.5% of the total vacant inventory. The bulk of vacant subleases are located within Interstate 55, Western Cook County and O’Hare, which account for 49.7% of all sublease vacancies. Overall net absorption totaled 6.3 msf through Q4 2025, down 41.9% YOY. This decline was largely driven by 15 vacant spaces of 250,000 sf or more which were added to the market this year, totaling 7.6 msf, which offset occupancy gains. As previously leased space is occupied in the upcoming quarters, absorption is expected to increase and stabilize.
Pricing: Rates Remain Elevated
Average asking net rental rates recorded moderate annual growth in Q4 2025, up 4.4% YOY to $7.16 per square foot (psf). Ten out of the 19 submarkets experienced YOY rent growth. Western Kane County, Chicago South and Central DuPage recorded some of the highest YOY rent increases, up 59.4% to $8.83 psf, 17.9% to $8.05 psf and 9.8% to $9.42 psf, respectively.
Supply: Pipeline Growth Signals Market Strength
In 2025, construction completions totaled 9.4 msf, a 32.4% YOY decline. Meanwhile, 10.4 msf of inventory remains under construction, representing a 7.8% increase YOY. There were seven construction starts during Q4 2025, in addition to 23 starts earlier in the year. The average development size is reported at 306,000 sf, a 5.7% increase YOY.
Submarkets with the most product delivered were the Interstate 39 and Interstate 80 Corridors, which collectively accounted for 52.1% of overall annual completions. The Interstate 80 and Interstate 55 Corridors have the most product currently under construction with 66.9% (7.0 msf) of the overall development pipeline.
There was 5.2 msf of built-to-suit (BTS) product delivered in 2025, up 51.3% from the 3.4 msf that was delivered in 2024. Currently, 4.6 msf of BTS product is under construction, with 48.9% located in the Interstate 80 Corridor submarket. This is primarily driven by two major BTS leases signed this quarter at Elion Logistics Park 55: Kimberly-Clark’s 1.5 msf distribution center, which also began construction in Q4 2025, and Greenbox Systems’ 1.1 msf facility, expected to break ground in early 2027.
As of Q4 2025, 5.8 msf of spec industrial space was under construction, representing 56.2% of the total pipeline, with 21.0% of that space already pre-leased. Five spec buildings totaling 1.9 msf were delivered in Q4 2025, bringing annual completions to 4.2 msf. Spec projects currently in development are concentrated within the Interstate 55 and Interstate 80 Corridor submarkets, totaling 4.0 msf (67.8%).
Sales: Momentum Restored
A total of 34.1 msf of industrial product was sold in 2025, up 16.8% compared to 2024 totals. Buildings under 100,000 sf accounted for 73.6% of Q4 2025 sales and 67.7% of annual sales, while the average building size sold was 111,000 sf, down 2.2% YOY.
There were 201 investment sales recorded in 2025, a 29.7% YOY increase, totaling 23.9 msf. User sales reported a 27.6% increase in volume YOY with 10.2 msf sold through 2025.
