Chicago, IL Industrial Market Report Q2 2026

Chicago’s industrial market entered the second quarter with improving demand and relatively balanced operating fundamentals. Vacancy measured 5.4%, remaining below the national industrial rate and reflecting stronger leasing activity following the slower environment observed in early 2025. Net absorption totaled approximately 749,000 SF during the second quarter, contributing to more than 10 million SF of positive absorption over the trailing 12 months. Demand has increasingly favored newer logistics facilities, particularly buildings larger than 200,000 SF that offer higher clear heights, additional trailer parking, greater dock capacity, and infrastructure suited to automation. Large modern logistics properties have captured the majority of recent absorption, while portions of Chicago’s older inventory have experienced weaker occupancy trends.

 

The Joliet Area has emerged as a particularly strong demand center, supported by the market’s intermodal infrastructure and concentration of large-scale distribution facilities. Asking rents reached approximately $10.23 per SF in Q2, while annual rent growth measured 4.8%, demonstrating landlords’ ability to capture higher rents despite slower economic growth. Modern large-format properties have generated the strongest rent gains as occupiers prioritize operational efficiency and supply chain functionality. With leasing momentum improving and near-term completions relatively restrained, market conditions should support relatively stable vacancy and positive rent growth.

 

Key Findings

• Chicago’s industrial fundamentals strengthened as leasing activity accelerated, modern logistics facilities captured an outsized share of demand, and vacancy stayed relatively tight.
• Development activity increased as improving tenant demand supported new projects, although substantial preleasing across the pipeline reduces near-term supply pressure.
• Investment conditions stabilized as buyers maintained a preference for modern, well-leased logistics assets despite elevated financing costs and higher cap rates.

 

Chicago Industrial Supply & Demand Dynamics

Source: CoStar Group, Inc.

 

Chicago Demographics

Source: Oxford Economics

• Unemployment rate: 4.8%
• Current population: 9,412,589
• Households: 3,716,118
• Median Household Income: $95,198

 

Chicago’s diversified economy and extensive transportation infrastructure provide a durable foundation for industrial demand. The metro supports approximately 4.8 million jobs, with trade, transportation, and utilities representing its largest employment sector and reinforcing the region’s role as a national distribution hub. Six of the seven largest U.S. railroads and ten interstate highways serve the region, while O’Hare International Airport adds another major freight gateway. Manufacturing also represents an important component of the employment base, supported by major automotive, food, and consumer goods operations. Median household income exceeds the national level, and Chicago retains a highly educated workforce that supports a broad mix of industries. Large public and private investments in advanced manufacturing, data centers, quantum technology, and research infrastructure could create additional industrial and technology-related demand over the longer term.

 

Top Industrial Leases in Chicago

Source: CoStar Group, Inc.

• Orchard Rd: 1,200,000 SF
• Hyundai Translead: 906,517 SF

 

Population, Labor Force, & Income Growth

Annualized Rates of Growth | Source: Oxford Economics

 

Chicago Industrial Construction

Development activity accelerated as stronger leasing fundamentals encouraged developers to advance new projects. Approximately 22.5 million SF was under construction, up significantly from the prior year, with large-format facilities accounting for the majority of the pipeline. Construction remains concentrated in O’Hare, I-88 West, Joliet, Indiana, and Northwest Cook, while data center projects have become an increasingly important source of development near O’Hare and Northwest Cook. Only about 1.1 million SF delivered during the second quarter, keeping near-term additions relatively limited. Importantly, roughly two-thirds of the active pipeline is preleased, indicating that much of the recent construction increase is supported by tenant commitments. Leasing activity has also improved for larger projects underway, reducing availability ahead of completion.

 

SF Construction Starts

Source: CoStar Group, Inc.

 

SF Under Construction

Source: CoStar Group, Inc.

Chicago Industrial Sales

Investment held relatively steady as buyers maintained a strong preference for modern logistics facilities with quality tenancy and long-term income. Sales volume totaled approximately $1.6 billion during the second quarter, while average pricing reached about $102 per SF and cap rates measured 8.1%. Logistics assets continue to capture the majority of investment activity, supported by stronger leasing performance and tenant demand for newer facilities. Recent transactions also show buyers paying premiums for modern distribution properties, particularly assets with strong tenants, high clear heights, and newer construction. Higher borrowing costs have increased pricing sensitivity and widened the valuation gap between institutional-quality properties and older, less functional inventory. Institutional and private investors remain active, providing liquidity across a range of transaction sizes. Improving leasing fundamentals should support investment demand, although financing conditions and the larger development pipeline expected in 2027 and 2028 will remain important considerations for pricing.

 

Sales Volume

Source: CoStar Group, Inc.

 
 

 

By the Numbers

Q2 2026 | Source: CoStar Group, Inc.

• Sales Volume: $3.3B
• Price Per SF: $226
• Cap Rate: 8.8%
• Vacancy Rate: 4.5%
• Rent Growth: 3.7%
• Asking Rent Per SF: $24.42
• Under Construction: 1.5M SF
• SF Delivered: 423K
• SF Absorbed: -362K