Making Room for Industrial Infill: Maximizing Existing Urban Infrastructure Supports Sustainable Growth
With a steady march of employees returning to downtown and suburban offices nationwide, it’s an important time to take a closer look at the upside of infill development. As existing offices are slowly filling up again with workers and/or being converted to other uses, industrial redevelopment will be an important part of this complex urban revitalization plan to prevent sprawl, increase access to existing infrastructure and boost vital property tax revenue just when our urban cores need it the most.
However, as with all property development, it takes bold vision and collaboration to backfill these unique parcels scattered throughout our metro areas. And in addition to housing, retail or office, industrial spec and build-to-suit developments are a great solution for the potential of urban infill, especially in major cities with little room to expand, like Chicago and its urban suburbs.
A variety of market and economic conditions are driving this growing interest in urban infill. Buyer demand is also very strong in these core areas, showing that infill properties are poised to outperform properties outside of infill areas.
According to BKM Capital Partners, “regardless of how U.S. economic growth and industrial tenant demand perform in 2025, the ongoing scarcity of smaller [urban] industrial space is likely to persist throughout the year and beyond.” In fact, BKM states that the 23 million square feet of small industrial space currently under construction across the country represents less than 0.3% of the existing stock of industrial property nationwide.
It’s easy to see why. Infill automatically appeals to a larger pool of tenants given its strategic position at the core of vibrant metro areas. Furthermore, industrial infill can support a community’s larger revitalization goals and a desire to offer more quality buildings for discerning businesses looking for greater metro-area access.
Hurdles to overcome
Despite the rising demand, developers and communities need to be prepared to navigate some of the common challenges seen with infill.
Potential industrial development sites in metro areas often face rezoning pressures as cities also see the value in other uses for the space, including retail, office and housing. Community pressure based on perceived value of one building use type over another can quickly derail any plans for industrial applications.
Concerns regarding noise, lighting, traffic and hours of operation need to be addressed with most industrial developments, ensuring the neighborhood will not be disrupted.
Given these prime locations and their correlating higher land costs, along with the complexities of infill work pushing project costs higher, developers need higher rents for project feasibility. Getting these top of market rents requires the building’s features to be at the top of the market to make sure the final product that’s delivered is appealing to users. That, combined with what can be a lengthy approval process to achieve the required zoning for the development, and with the overall community sensitivities, create many challenges that most infill project teams need to be prepared for.
Collaboration is key
Developers can mitigate most of the concerns through strong community engagement and collaboration with city officials. Applying sustainable building practices, conducting proactive noise, lighting and traffic studies, and enhancing the overall area through improved landscaping, storm water drainage and better traffic flow will not only solve immediate building concerns, but deliver upgrades to the local area for challenges that may have existed for decades.
More importantly, successful infill project work begins with early and transparent collaboration with the city. As these projects are often integrated with a community’s long-term economic development and revitalization plan, understanding and sharing a common vision for how infill can help achieve those objectives is key. The more involved and receptive the municipality is with the development plan, the more support developers will foster throughout the entire development process.
Sizing up the potential
Regardless of the challenges infill often presents, community leaders and businesses are getting behind it in a big way, ready to partner with creative and capable developers to find viable solutions for backfill development.
The benefits of infill are too significant to ignore. It starts with the economic boost these developments provide. From job creation, significant real estate tax revenue and supporting area businesses like shops, entertainment and residential, infill has the potential to serve as a key piece to neighborhood vibrancy and wholeness.
On top of that, as brownfield spaces are redeveloped, the community at large benefits from the positive environmental impact the associated remediations deliver. From cleaning up contaminated sites to flood mitigation through better stormwater management systems to greener landscapes, good design can quickly fill in blighted or unproductive gaps in urban areas with attractive and productive parcels.
This was the case for Opus and its Alsip Park 294 infill project. The city was eager to partner on an industrial solution, and it provided a tax incentive as well as an enterprise zone sales tax abatement to help off-set some of the costs associated with the unique challenges of the site. The 360,000 square foot industrial development located just over 20 miles from downtown Chicago, filled a void for the area with not only Class A industrial warehouse space, but remedied a variety of previous challenges with better traffic flow, clearing debris and offering a long-term ground water drainage solution that was plaguing the area.
What’s next for infill
The rapid growth of e-commerce business and the more recent advancements in material handling and automation practices have allowed logistics and storage to soar in industrial properties.
Traditional buildings with shorter clear heights are becoming obsolete as building operators can go more vertical than before doing more within a smaller footprint and thus requiring less land. Density of racking through robotics, automated cranes and other high-tech material tracking methods create a more efficient use of space as well.
These advanced industrial storage solutions, now pushing building clear heights to 32 – 40-feet typically (and sometimes higher), are prime for the infill market as they unlock more urban and smaller sites to be utilized, which may have previously not been an option for users.
As this trend continues, we’ll see even greater need for narrower yet higher industrial space which are closer in proximity to end users and consumers. This allows businesses to cut their transportation costs considerably as their logistics operations can now sit just blocks away from retailers and customers instead of miles.
Still, no matter how functional and well positioned an infill building is, partnering with a well-educated broker is vital to the ultimate success of the project. Partnering with a broker who truly understands the users and their challenges will help all involved achieve their real estate goals.
Given the various capabilities and expertise needed to maximize the potential of these infill industrial buildings, we’re going to see developers with a track record of comprehensive design-build offerings leading the way. Crafting a building to suit the site, through a maze of complex design and engineering needs, coupled with the ability to partner closely with city and governmental agencies, will be required.
Industrial infill, while gaining serious momentum in recent times, is proving to be a smart and sustainable commercial real estate solution as businesses continue to find new, more efficient ways to meet their operating needs.
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