Chicago Industrial Market Sees Strong Demand as Prologis Reports Record Leasing

Chicago's industrial market continues to rank among the most active in the nation as logistics operators, e-commerce companies, and third-party logistics providers expand their distribution networks across the metro area's massive warehouse corridor.

Prologis Sets Leasing Record

Prologis, the world's largest logistics REIT, reported in January that it leased more space in 2025 than in any previous year, a milestone driven by strong demand across its U.S. portfolio. The company, which owns approximately 1.2 billion square feet globally, has been particularly active in major logistics hubs including Chicago, where its portfolio spans the I-80/I-55 corridor, O'Hare submarket, and the I-88 tech corridor.

The record performance underscores a broader trend: despite a pullback in speculative development, tenant demand for modern Class A logistics space remains robust. Prologis has also been ramping up its data center development platform, diversifying beyond traditional warehouse space to capture demand from AI infrastructure buildouts.

Development Pipeline Adjusts

Chicago's industrial development pipeline has moderated from the peak levels of 2022-2023, when speculative construction reached historically high levels. Developers including Bridge Industrial, CenterPoint Properties, and NorthPoint Development have shifted toward build-to-suit projects and pre-leased developments as vacancy rates have ticked upward in certain submarkets.

The I-80 corridor south of the city — anchored by markets like Joliet, Elwood, and Channahon — remains the primary destination for large-format distribution centers exceeding 500,000 square feet. The submarket's access to intermodal rail facilities operated by BNSF and Union Pacific gives it a structural advantage for supply chain operations.

In the tighter urban infill market, demand for last-mile delivery facilities near downtown Chicago has kept vacancy low and rents elevated. Properties in the O'Hare submarket and along the Kennedy Expressway corridor have been particularly competitive.

REIT Performance and Capital Flows

Industrial REITs have outperformed the broader real estate sector over the past year. Prologis (PLD) shares have traded near 52-week highs, and peers like Rexford Industrial and EastGroup Properties have seen similar strength. The Vanguard Real Estate ETF (VNQ), which tracks the broader REIT index, has been lifted in part by industrial's relative resilience.

Private equity capital continues to flow into industrial assets as well. Blackstone, which controls the largest private industrial portfolio globally through its Mileway and Link Logistics platforms, has signaled plans to increase its industrial exposure in major U.S. markets.

Interest Rates and the Broader Outlook

The Federal Reserve's interest rate path will be a key variable for Chicago's industrial market in 2026. Higher-for-longer rates have constrained new speculative development — which, paradoxically, could benefit landlords as demand catches up with the existing supply pipeline.

According to CBRE's latest industrial outlook, national industrial vacancy rates remain well below the long-term average despite recent increases. Markets like Chicago, with deep transportation infrastructure and a central geographic position, are expected to outperform as supply chain normalization continues.

For investors, the industrial sector's combination of strong fundamentals, limited new supply, and structural tailwinds from e-commerce growth makes it one of the most attractive asset classes heading into 2026.