News Article | 11/14/2016

Amazon, Ikea among those building up Joliet, SW suburbs

As consumers continue to shift more toward online shopping, quick delivery is essential and is what sets apart competitors.

That need for speed means retailers are demanding additional warehouses. The surging demand for warehouse space has helped set off a building boom unlike anything in recent history, experts say.                                                                             

The demand is hot in the far southwest suburbs of Chicago and Joliet region, where developers and companies see many positives. There are massive parcels of land available for new distribution centers, taxes are lower than nearby areas, an eager workforce awaits and major highways and railway hubs are accessible for shipping.

That’s why e-commerce giant Amazon recently opened three distribution centers in Joliet and Romeoville and another planned in Monee.

Much of the warehouse craze is a reaction to a Amazon, experts say. Shoppers have gotten used to short shipping times when ordering from the retail giant’s huge inventory, forcing other retailers to follow suit in this area.

Best Buy recently opened in Woodridge. Mars candy is now in Joliet. Room Place and Ashley Furniture have massive warehouses and showrooms in Romeoville. Ikea is constructing a huge distribution center in Joliet. And more are coming to this market, experts said.

“This area has become the best industrial market that we have seen in about 15 years,” said Craig Hurvitz, vice president of Colliers International, a commercial real estate firm.

The region — referred to as the I-55 corridor with southwest suburbs Romeoville, Plainfield, Bolingbrook and others, and the I-80 corridor around Joliet — are now experiencing their biggest boost in new construction and leases for commercial and industrial buildings since before the Great Recession.

Altogether, these markets have seen 13.7 million square feet of new construction this year, compared to 5.8 million in 2015. Next year is expected to see as much or more building and leasing opportunities, according to Colliers.

The vacancy rate in 2016 has been 6.7 percent, compared to 2010 when it was 12.5 percent. Even when the market was hot in 2007, before the recession, the vacancy rate was 8 percent, Harvitz said. Construction companies are erecting more buildings on spec, meaning they’re building first and finding occupants later. No one appears worried, because these spec buildings have been snapped up after they’re finished. Government officials, local developers and real estate brokers are all working in harmony to get companies what they want, when they want it, experts said.

“We are probably part of a handful of communities in Illinois that survived the recession and still grew and it just snowballed,” said Romeoville Mayor John Noak. “It has become an evolution, because before the recession, we had mostly logistic companies and manufacturing. Now we’ve become a center where larger companies are establishing their regional headquarters here. We’re getting retail, and Amazon is one of them. But this started even before Amazon came in. There’s lot of e-commerce, retail and other consumer goods.”

Amazon has been growing so quickly that it needed to get a distribution center in the Midwest. Since last year, the e-commerce giant announced four fulfillment centers for this region. One opened last year and another in September, both in Joliet. Another opened in September in Romeoville. A fourth center is under construction in Monee.

Each is now operating at high speed, picking, packing and shipping products to customers and it’s expected to get even busier as the holidays approach. Each location is geared toward certain size products.

For example, large items like TVs and kayaks are being shipped from Romeoville, said Amazon spokeswoman Nina Lindsey.

“If you look at Amazon’s growth, it’s due to our customer demand, and in order to fulfill that demand, it was important for us to look at locations that were close to our customers,” Lindsey said. “We try to be as close as possible to our customers to make sure we continue to provide fast delivery.”

Besides Amazon, Ikea also needed a Midwest distribution center. It has 42 stores nationwide, with more expected.

While it ramps up with more stores, Ikea plans to boost its e-commerce. The Swedish retailer bought 72 acres at Laraway Crossings Business Park in Joliet and is constructing a 1.4 million-square-foot distribution center that could open next summer to serve at least 10 stores.

“We wanted to own the land and build from scratch because there is certain technology that we use in all of our distribution centers and we are designing the one in Joliet for our systems,” said Ikea spokesman Joseph Roth.

The area has a lot of offer. Many clients are looking to consolidate their operations into one, larger facility, instead of several smaller ones and they’re seeking the open land in this region, said Traci Buckingham Payette, senior vice president of CBRE Industrial & Logistics in Oak Brook.

She has seen more customers seek buildings that are more than 1 million square feet. More e-commerce, food and consumer product companies are arriving than ever before, she said.

“The recession affected this area just like all the others, but it has recovered quickly and has one of the lowest vacancy rates I’ve see in my 18 years in this profession,” Payette said. “They have not overbuilt here, there’s a good amount of development and demand is very strong.” 

Steve Ostrowski, vice president of the industrial team at commercial real estate brokerage Jones Lang LaSalle, worked with Whirlpool on securing a long-term lease for 750,000 square feet in Joliet, among other major customers.

“There’s a large pent-up demand since the recession,” Ostrowski said.

His partner, Keith Stauber, managing director at Jones Lang LaSalle, said many clients, like cereal company Post Foods, needed a large facility quickly and, from first visit to move-in, the process took about six months.

“We’re very optimistic going into 2017,” Stauber said. “Developers have been continuing to do the spec building, but they haven’t overbuilt. Demand is keeping pace.”

Ostrowski and Stauber believe Amazon has brought more visibility to the region, especially among large clients, but smaller companies also are moving in as well. VPET, a plastics company, recently acquired 130,000 square foot building in Romeoville, while Stanley Steamer obtained 20,000 square feet in Bolingbrook.

“This just shows the underlying strength of the economy,” Stauber said.