Chicago industrial rent escalations shifting in favor of landlords

Post-COVID, industrial annual contractual rent escalations in Chicago shifted upward significantly, now averaging 3.96% at the end of 2024. Five years ago, market standard escalation rates were more tenant-favorable as nearly 60% of all leases signed had bumps between 2.5% - 2.99%. Only a small fraction of leases at that time had showed escalations above 3.0%.
By the end of 2024, it became clear that the increase in higher rent escalation rates was here to stay. The most common escalation range shifted to 3.5% - 3.99%, accounting for 49% of the leases. At the end of Q1 2025, this trend persists, with 50% of all newly signed leases featuring escalations between 3.5% and 3.99%.
Rental rates remained steady, averaging $8.20/nnn at the end of Q1 2025, reflecting a slight decrease of 1.5% from the prior year. These sustained elevated rents and the new norm for escalations is benefiting investors who purchased assets over the last few years with mark-to-market strategies

May 1, 2025

US-IL-CHSUB Chicago Suburban