05 Dec Morgan Stanley fund buys warehouses in Franklin Park, Downers Grove from Bridge Development
A local developer has sold two big suburban warehouse developments for nearly $200 million, cashing out even before filling them up with tenants.
Itasca-based Bridge Development Partners sold the projects in Franklin Park and Downers Grove, which total 1.4 million square feet, to Morgan Stanley’s Prime Property Fund. It’s one of the biggest Chicago-area warehouse sales in the past few years: The fund paid $111.6 million for the Franklin Park property, according to New York research firm Real Capital Analytics, and $83.4 million for the Downers Grove property, according to DuPage County property records.
The Chicago industrial real estate market is so strong these days that developers like Bridge are stamping out massive warehouses in the suburbs, selling them quickly and moving on to their next project. Developers will complete 23.7 million square feet of industrial space in the Chicago area this year, just shy of the 24.8 million completed in 2017, a high for the current boom, according to Colliers International.
Many investors are willing to pay up for buildings that still have a lot of vacant space. The Franklin Park project, three buildings totaling about 740,000 square feet, is about 50 percent leased, while the three-building, 680,000-square-foot Downers Grove development is only about 25 percent leased, said Bridge Chief Operating Office Steve Groetsema. Bridge completed both developments last year.
The industrial real estate market is booming amid the strong economy, which has boosted demand for space from companies that make, store and ship goods. The growth of e-commerce has lifted the market further, as firms like Amazon expand and many retailers retool their supply chains. The local industrial vacancy rate dropped to 6.15 percent in the third quarter, its lowest level since the beginning of 2001, according to Colliers.
Investors have capitalized on the growth by pouring money in the sector. While investors generally have grown cautious about buying commercial property here, worried about the city and state’s precarious fiscal condition and the prospect of rising property taxes, Groetsma doesn’t see any signs that they’ve lost their enthusiasm for industrial real estate.
“We have not seen any type of pullback in Cook County,” he said.
Bridge sold the two Chicago-area developments to Morgan Stanley as part of a three-property portfolio sale that included a project in Pompano Beach, Fla. If the Franklin Park property sold by itself, it would rank by price as the biggest single-property industrial sale in the Chicago market in at least two years, according to Real Capital.
Bridge developed the project, Bridge Point Franklin Park, at 10601 Franklin Ave., just west of Interstate 294. Three tenants in the freight and logistics business have leased space there: Agility, Flexport and Mainfreight.
Bridge Point Downers Grove, near Lacey and Finley roads next to Interstate 355, includes one warehouse leased to three tenants: Thyssen Krupp, Remedi SeniorCare and Cooper’s Hawk Winery. The other two buildings are empty.
A Morgan Stanley representative did not return an email.