“This is a great time to be buying raw land for industrial development beyond Chicago's suburbs,” says Gerard Keating, a principal, who paid $20,000 an acre for his land. Three years ago, when residential subdivision builders were bidding in the area, the same land carried an asking price of $50,000 an acre.

Sources say Chicago's First Industrial Realty Trust is close to a deal for a large industrial site in northwest Indiana, within an hour's drive of Chicago, for yet another intermodal project. While the company hasn't acknowledged that, Rick Czerwinski, national director of leasing and asset management at First Industrial, says, “We expect it will be a major component of our business in the future. We'd love to have one in metro Chicago.”

Too many intermodals?

Chicago already has more than a dozen older, mostly smaller intermodal hubs, but Czerwinski doesn't think railparks are in danger of getting overbuilt. “I don't think we're close to that point yet.”

Kris Bjorson, a managing director at Jones Lang LaSalle in Chicago, recalls when industrial clients “would come to us in years past looking for space and tell us they preferred rail-served sites. Now rail is an outright requirement. And metro Chicago is fairly tight for good rail-served facilities.”

The intermodal projects have risen for many reasons, but one important trend has been key. The Chicago metro market is pushing far beyond its old six-county boundaries to new exurban vistas.

Towns like Rockford, DeKalb, Kankakee, Portage, Ind., and Kenosha, Wis., once considered too remote for distribution to Chicago's 8 million-plus consumers, are now filling up with suburban population spillover and considered strategic centers for distribution.

These distant submarkets offer cheap land and lots of it, often along rail lines. For prospective intermodal developers, that combination has been hard to resist.

But there are some risks involved. Aaron Paris, chairman and CEO of Paris Development LLC in Chicago, who was the developer of the Rochelle intermodal seven years ago when he was with original owner DP Partners of Reno, Nev., says that he's been disappointed with the progress in attracting tenants there.

“Intermodals are great, but I don't think you can put them too far away from populations,” says Paris. The rise of intermodal hasn't prevented developers from putting up big speculative warehouses along highways. The key I-80 market west of Joliet now has seven spec buildings exceeding 500,000 sq. ft. with precious few tenant prospects in sight.

Rosemont-based Opus North Corp. has a 221-acre industrial park in the former farming town of Minooka, 10 miles west of Joliet. Opus sold an 861,000 sq. ft. warehouse there to Macy's a year ago.

The company has just finished work on a new 965,000 sq. ft. spec warehouse, but this time there are no offers from tenants. The asking rent is $2.95 per sq. ft. on a net basis, a price not much different from what industrial space in the outer suburbs was going for a decade ago.

Rents turn aggressive

“It's very competitive here right now,” says Greg Terwilliger, real estate director at Opus North. “Rents have become very aggressive. There was no tenant activity at all over the summer, and now we're seeing just a little uptick in interest. We'll probably have to wait until the [presidential] election is over before companies start making supply chain decisions again.”