In the first quarter of 2025, Chicago’s industrial market saw the start of 1.5 million square feet of new construction — a sharp decline from the 11.4 million square feet that was underway during that timeframe last year.

At the same time, asking rents continued their upward trend, rising 4.6% year-over-year to reach $6.36 per square foot. However, the industrial vacancy rate climbed to 10.6%, marking the second-highest rate among major Midwestern markets and signaling a departure from the tight conditions seen between 2021 and 2023.

Meanwhile, leasing activity remained steady in key areas with companies continuing to realign supply chains to be closer to end markets. Significant deals included Flextronics’ 335,000-square-foot lease in Libertyville, Ill., and Uline’s ongoing expansion into southeast Wisconsin.

Of course, discussions around potential tariff policies under the Trump administration have renewed attention on reshoring U.S. manufacturing. Yet, while Chicago offers robust transportation infrastructure, a central geographic location and strong access to energy, some analysts remain skeptical that tariffs alone will drive large-scale reshoring. Rather, they argue that rising costs may push companies to seek alternative trade environments, as opposed to bringing operations back to the U.S.

Despite these mixed signals, investment interest has held strong. Industrial property sales in Chicago totaled $616 million in Q1 2025. This volume was the third-highest nationally (surpassed only by New Jersey at $832 million and Dallas at $711 million) and made it the top-performing market in the Midwest. Specifically, properties traded at an average of less than $100 per square foot, which is notably affordable as they rest below the national average ($126 per square foot through Q1 2025).

Among the largest transactions of the quarter, SL Industrial Partners picked up a 925,000-square-foot portfolio of industrial flex space across three Chicago-area business parks for $76.4 million from Stockbridge. Another notable sale involved G3 Enterprises’ $34.4 million acquisition of a 380,000-square-foot warehouse on a 19-acre site in Bedford Park.

For more analysis across all major industrial markets in the U.S., see CommercialEdge’s original report.