Economic Overview
The Chicago metro area remained relatively stable through Q3 2026 despite a challenging economic environment, with unemployment up 90 basis points (bps) year-over-year (YOY) to 5.1%. Nonfarm employment held steady at 3.8 million jobs, up 7,600 YOY. Industrial-using sectors delivered mixed results in August 2026, with trade and transportation employment declining 1.0% YOY while manufacturing employment increased by 0.8% YOY.
Demand: New Leasing Gains Momentum
Chicago's industrial market reported a surge in demand through Q3 2026, with year-to-date (YTD) new leasing activity totaling 40.0 million square feet (msf), a 33.8% increase YOY. New leasing volume has nearly matched the 2025 full-year total of 42.2 msf. Momentum strengthened further in Q3 2026, as new leasing volume climbed 52.0% quarter-over-quarter (QOQ) to nearly 18.0 msf from 11.8 msf in Q2 2026. The overall increase in new leasing volume was largely driven by strong big-box demand, with 16 new leases of 500,000 square feet (sf) or larger signed through Q3 2026, compared with just 10 through year-end 2025. The Interstate 80 Corridor led the market with 9.0 msf of new leasing through Q3 2026, followed by the Interstate 55 Corridor with 7.1 msf.
The overall industrial vacancy rate remained stable in Q3 2026, holding at 4.7% for the fourth consecutive quarter and up just 10 bps YOY, as new tenant occupancies were offset by move-outs. Meanwhile, 8.9 msf remained leased but unoccupied, contributing to vacancy. Excluding this space, the vacancy rate would decline 70 bps to 4.0%. Overall net absorption totaled 7.5 msf YTD 2026, up 43.0% YOY, with an additional 5.9 msf slated for occupancy by year-end 2026.
Pricing: Rent Growth Holds Steady
Average asking net rent increased by a notable 3.9% YOY in Q3 2026 to $7.53 per square foot (psf). Annual rent growth was reported in 11 of the 20 submarkets. The Interstate 80 Corridor, Southern DuPage and Western Kane County led the market in rent growth, with asking rents increasing 32.7% to $7.19 psf, 31.1% to $11.33 psf, and 26.9% to $9.00 psf, respectively.
Supply: Construction Activity Accelerates
Development remained robust through Q3 2026, with 7.8 msf delivered YTD and an additional 14.8 msf under construction. Deliveries were down slightly YOY, while the pipeline expanded 63.8% from 9.0 msf a year earlier. Construction starts increased 13.7% QOQ in Q3 2026, with nine projects totaling 4.2 msf breaking ground. Projects under construction average 370,000 sf across 40 facilities, and eight developments are 500,000 sf or larger, two of which are speculative.
The Interstate 55 and Interstate 80 Corridors led construction deliveries, collectively accounting for 49.6% of overall completions YTD. The Interstate 80 Corridor and Southern Fox Valley account for the largest share of projects under construction, representing 46.5% (6.9 msf) of the overall development pipeline.
Build-to-suit (BTS) completions moderated through Q3 2026, with 2.4 msf delivered YTD, a 56.3% decrease from the 5.5 msf completed during the same period last year. However, the pipeline tells a more optimistic story: 8.4 msf of BTS space was under construction as of Q3 2026, with the Interstate 80 Corridor and Northwest Indiana accounting for 61.0% of it. Two projects anchor the BTS pipeline: Kimberly-Clark's 1.5 msf distribution center in Wilmington, which broke ground in Q4 2025, and John Deere's 1.2 msf facility in Lowell, which started construction in Q1 2026.
Speculative construction remained a key driver of the development pipeline in Q3 2026. As of Q3 2026, 6.4 msf of speculative space was under construction, representing 43.2% of the total pipeline. Speculative deliveries also increased, with 27 buildings totaling 5.4 msf delivered YTD, a 97.1% increase YOY. Most of this space is concentrated in three submarkets: the Interstate 80 Corridor, Interstate 55 Corridor, and Chicago South, which together account for 3.9 msf, or 61.0%, of speculative space under construction. Developers' willingness to build without tenants in place reflects sustained confidence in leasing demand for new industrial product.
Sales: Investors Drive Growth
Industrial sales activity accelerated sharply through the first three quarters of 2026, with 48.7 msf sold YTD, a 72.0% increase over the same period last year. Investor activity was the primary driver of the increase in industrial sales volume. Investment sales totaled 40.8 msf YTD, up 91.6% YOY and accounting for 83.9% of total volume. User sales expanded at a more moderate pace, increasing by 12.2% YOY to 7.8 msf from nearly 7.0 msf through Q3 2025.
