Target plans to open a massive warehouse in the Little Village neighborhood, cutting a deal to occupy a controversial development underway on the former Crawford Power Plant site.
The Minneapolis-based retailer signed a lease late last year with the developer of Exchange 55, a $100 million industrial project at 3501 S. Pulaski Road, according to a report by brokerage Colliers International. The project just north of Interstate 55 attracted vocal opposition when the developer, Hilco Redevelopment Partners, sought the city’s approval for it in 2018, with critics saying it would generate too much truck traffic and pollution.
The deal highlights the insatiable appetite among retailers, e-commerce companies and logistics firms for warehouses these days. Most of the action is in suburbs where land is plentiful and highways are less congested, making it easy for trucks to get in and out.
But demand also is booming for “last-mile” locations close to the city, allowing retailers to restock urban stores and fill online orders quickly. Many retail chains are retooling their supply chains to compete with e-commerce firms like Amazon, and developers like Hilco are building like mad to meet their needs. Last year, Target signed a lease for a 1.2 million-square-foot distribution center—that’s 21 football fields—in Joliet, the largest Chicago-area industrial deal of 2019, according to Colliers.
Cushman has marketed the project as the largest industrial building available in Chicago, with 990,900 square feet, according to a Cushman brochure. Hilco, a unit of Northbrook-based Hilco Global, has the flexibility to expand the project to nearly 1.1 million square feet, the brochure says. It’s possible that Target is leasing less space than that, but if the deal is that big, the retailer would be involved in the two largest local industrial leases of 2019, according to Colliers.
The Hilco project faced heavy resistance from Little Village residents, environmental groups and some Chicago aldermen when Hilco proposed it, even though it was expected to generate nearly 180 permanent jobs. Opponents argued the development would merely replace one form of pollution, emissions from a coal-burning power plant, with another, diesel exhaust from dozens of trucks driving to and from the property each day.
Yet Chicago City Council approved Hilco’s plans in 2018 and signed off on property tax breaks for the project worth $19.7 million last year.
The Target lease caps another exceptional year for the Chicago industrial real estate market. The local industrial vacancy rate finished 2019 at 6.25 percent, up slightly from 6.15 percent in the third quarter but down from 6.4 percent a year earlier, according to Colliers. The Chicago-area vacancy rate stands about where it was is 2001.
“Ecommerce is a threat for certain types of retail real estate, but it is increasing demand for industrial space with little end in sight. Ecommerce customers seek a greater variety of goods and speed of delivery (requiring more warehouse space to be located closer to population centers and express shipping hubs).”Green Street Advisors, a Newport Beach, Calif.-based research firm
It’s a golden era for owners and developers of warehouses. Amid a booming economy, companies need more space for storing and shipping their products.
The e-commerce boom has added jet fuel to the market. Amazon has been aggressively expanding its network of warehouses, recently buying a huge site for one Bolingbrook. Amid rising online sales, legacy brick-and-mortar retailers like Target also are investing heavily in industrial real estate. Target’s digital sales rose 31 percent in third-quarter 2019.