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Logistics Property To Develop Distribution Center On Chicago's Southwest Side

Logistics Property To Develop Distribution Center On Chicago's Southwest Side

Logistics Property Co. LLC (LPC) will develop an urban distribution center southwest of downtown Chicago in an effort to capitalize on what is expected to be a marked increase in fulfillment and distribution of online orders in the city, the company said. It is the company's first such parcel in Chicago.

The company plans to build a 137,000 square-foot facility on 6.4 acres in Chicago's McKinley Park/Bridgeport neighborhoods. The building will be located 6.5 miles from the Loop – Chicago's core downtown area. It will be one mile from I-55 and two miles from I-94. Chicago-based LPC said the location will enable one-hour deliveries to the downtown area. Work will begin in the summer and the site is scheduled to be open for business in early 2020.

The property, located closer to the city's red-hot West Side than its South Side area, is one of those rare "urban infill" projects where raw land is available in an otherwise supply-constrained area. The project is known as "3711 South Ashland Avenue" because it sits at the southeast corner of Ashland Avenue and West 37th Street.

Once a thriving industrial area that had fallen on hard times, Chicago's West Side, known as the "West Loop," has in recent years become a hotbed of information technology activity; Alphabet Inc's (NASDAQ: GOOG) Google Midwest region headquarters is in a leased 372,000-square foot building (formerly a cold storage facility) at 1000 W. Fulton Market.

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The West Side has also become a magnet for Chicago-area companies migrating into the city with the goal of recruiting urban dwellers who want to live near where they work. The most notable of these companies is fast-food giant McDonald's Corp (NYSE: MCD), which in early 2018 relocated its corporate headquarters to the West Side from suburban Oak Brook.

At the same time, rising commercial and residential rents have made it more expensive for developers of industrial properties to locate on the West Side, if they can find available high-quality space at all. "As the West Loop continues to be re-developed into office and multi-family, the distribution- and industrial-related users need to relocate but remain in close proximity to the city," said Aaron Martell, LPC's executive vice president-midwest region." The facility gives users a "large footprint with great access back into the city" via the two interstates and major local arteries, Martell said.

Chicago is expected to be a hot industrial market in the coming years. It will be the country's third-largest market for industrial demand and supply activity during the 2019-2020 time frame, according to projections from real estate firm Cushman & Wakefield. Martell said that Chicago, while space-constrained, is not as supply-choked as cities in the nation's coastal areas. 

LPC, which was formed a little more than a year ago, made news last month when it acquired land in Country Club Hills, about 23 miles south of Chicago. That parcel had been earmarked for years for development as a giant retail outlet mall. Those plans never came to fruition, however. The failed project is a microcosm of the profound challenges facing brick-and-mortar retail centers in a world that is increasingly turning to digital commerce.

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