Link Logistics’ Jack Hennessey Surveys the Industrial Leasing Market of 2023

Connect Industrial Midwest 2023, scheduled for Feb. 22 at Joe’s Live in Rosemont, IL, will present insights from a variety of expert perspectives. Among them will be Jack Hennessey, who as senior managing director, Central Region for Link Logistics oversees a 186-million-square-foot portfolio. We sounded out Hennessey for his take on the current leasing market. 

Q: Link Logistics is active nationally. From the standpoint of leasing demand, how does the Central Region (to include Texas as well as the Midwest) compare to the U.S. as a whole? 

A: Link’s full-year 2022 results reveal continued robust leasing demand in a macro environment of limited supply. To illustrate, on the year, our portfolio executed 78.5 million square feet of leasing at 45.9 percent blended cash leasing spreads. We expect more of the same in 2023 across the board, notably in our Central region markets. While customers are taking a bit longer to make leasing decisions, our teams are busy.  

Although vacancy remains low, it’s not as forceful as it was a year ago. Our East and West regions by default have more gateway markets, but the well-documented Texas growth story is creating tremendous need for logistics real estate.  

Further, the Midwest markets, with their unique market strengths, play an integral role in both regional distribution and last-mile delivery. Our teams are experiencing increased manufacturing customer demand due to more industrial production coming onshore, compounded with manufacturing-adjacent businesses having corresponding growth. 

Q: Within the Central Region, are there markets that have become more active compared to two or three years ago? Are these gaining stature at the expense of other markets? 

A: Infill space is scarce across the sector—and in high demand. Because of that, we see a high degree of activity and interest around infill in every market. Any vacancies that come forward capture immediate attention, although in candor the race for space is less intense—again, something we expected as we delved into industry fundamentals and shifts related to post-pandemic life.  

In the Midwest, Minneapolis stands out as a market that benefits from tailwinds related to healthcare and e-commerce. Chicago maintains its position as a premium logistics market for last-mile delivery and national distribution. It’s no secret that in Texas, the spotlight is on Dallas and Austin. Both are experiencing tremendous population growth, a lot of which comprises affluent consumers, and both remain underserved when it comes to modern facilities.  

Q: Services firms have forecast that we may see a slowdown in demand and that this could arise as a record amount of new product is delivered. What are your thoughts about this scenario? 

A: This is the natural next step when you look at the pandemic through a holistic lens: No one is surprised that some pandemic-era trends (i.e. consumer habits/preferences) have moderated. We are ready to meet the reality of incremental demand, which isn’t going away.  

Developers learned a valuable lesson during the Global Financial Crisis and are watching the supply/demand balance very carefully. We might see some slowing of new development, but given record-low vacancies across many markets, companies are actively looking for space. This is backed up by the fact that e-commerce isn’t going anywhere, there’s greater need for inventory, and nearshoring and onshoring are increasingly part of modern supply chains.