The Industrial (R)Evolution of Aurora

May 18, 2022


Industrial property in Aurora, IL, located 35 miles west of Chicago, originally served the local population, businesses, and surrounding communities. However, when the Reagan Tollway opened an interchange on Rt. 31 and I-88, Aurora became more accessible and appealing to companies requiring industrial real estate. Development increased in 10–12-year intervals, as several more interchanges were created along I-88 in Aurora. Industrial users wanted to be near the tollway, especially if involved in distribution, for the cost benefit of trucking and moving their product. With increased tollway access, the market went from, heavy industrial, smaller machine shops and light manufacturing, to modern business parks with a mix of industrial, warehouse and office.


In the 80’s and 90’s, institutional money began to pursue industrial as an asset class. Whereas office used to be the favorite, and then retail centers with large anchor tenants, the industrial market made strides because it was more stable and weathered economic recessions better. Because of this stability, institutional funds and pension funds favor investing in the product type.

About 10 years ago Amazon became a factor, building 700,000 to 1 million square foot buildings. These huge warehouses utilize a 50–60-acre site that previously might have accommodated several buildings. Not only did demand for large industrial land parcels increase, but the cost of money (due to low interest rates) fell to the point that developers could build a spec site with limited investment and extremely low cap rates upon sale. The demand to build these large buildings continues limiting land for smaller developments


As sites near highways became harder to find developers began looking 4 to 5 miles away from the tollway, or north to Geneva and south to Montgomery. Land pricing has adjusted to the supply and demand curve. Twenty years ago, we saw $3.50 PSF (per square foot) land pricing. Ten years ago, it had risen to $5.00 PSF. In recent years we saw $6.50 PSF pricing, but in the most recent transactions it has risen dramatically to $9.00-$10.00 PSF.

Meanwhile, the cost of construction has increased dramatically. While it used to be $75.00 PSF to build, $110 PSF is not uncommon now. The rental rate for a base investment is in the $9.00 to $14.00 PSF range for smaller square footages because of the lack of supply, large spec buildings are in the $5.50 -$7.00 PSF range based on specific buildout – peak pricing in any economic environment. The market will either have to adapt or pay for the additional freight.


While the real estate market is certainly cyclical, industrial remains strong. This supply and demand curve has put pressure on cap rates; however, even with the changes tied to the recent interest rate increase, small to medium size investors prefer multi-tenant industrial. The demand for space has also led to creative adaptive reuse concepts in the marketplace. In the O’Hare submarket, we have seen developers buying sites and scrapping the current buildings, and replacing them with new industrial/warehouse distribution centers. Since 2017, Aurora has added 2 million square feet of industrial and has another 1.5 million under construction.

What started nearly 60 years ago continues to evolve today. Brian Dolan of the Dolan and Murphy Team at Caton Commercial Real Estate has over 45 years of experience focused on the Aurora market with expertise in industrial property. Brian delivers critical market expertise to ensure clients are equipped with the tools they need to make educated decisions about each property’s position in the overall marketplace.

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