Chicago’s principal strengths, including its diverse economy, strong infrastructure and popularity among recent college graduates, are what keep investors and employers interested in planting their stakes in the Midwest’s largest economic outpost. In fact, 78% of Chicago’s job sectors recorded employment gains over the past five years, while another 55% of all sectors experienced both five-year and year-over-year employment growth.

Yet Chicago is projected to see jobs decline by 1.3% in the second half of 2023 and see average annual job growth of only 0.1% in 2024 through 2027, below the U.S. rate of 0.4% for the four-year period, according to Oxford Economics’ recent forecasts using U.S. Bureau of Labor Statistics data.

People who follow Chicago’s economy know that many of the area’s job losses are due to Illinois’ shrinking manufacturing sector. Although manufacturing jobs increased 2% year over year, Chicago has collectively lost almost 1% of this sector’s jobs over the past five years. Going forward, this sector's employment ranks fall 0.2% annually from 2023 to 2027, Oxford Economics is forecasting.

Looking at Chicago’s manufacturing or specialized commercial real estate footprint, it is a bit baffling that the market is experiencing employment contraction when specialized space demand metrics reveal a strong market. Over the past 12 months, the market absorbed over 2.2 million square feet of manufacturing industrial space and was able to secure 7.7 million square feet of leasing transactions. Although not the strongest demand fundamentals ever seen for Chicago’s manufacturing space, they are easily above the market’s 25-year average.

To boot, vacancy is currently standing at 3.6% — its lowest level over this quarter-century stretch. By the end of 2023, the market is also expected to add 1.5 million square feet of net manufacturing space.

As confusing as this may seem, Chicago is expected to both expand its specialized net footprint over the course of 2023 while also eliminating jobs during this time.

The first step to decoding this riddle is to study the market’s manufacturing space, both in terms of new construction and demolitions. Since 2000, Chicago completed 29 million square feet of manufacturing space but demolished 48 million square feet. The net effect was about 19 million square feet removed from the competitive set in 23 years. In other words, the specialized manufacturing space on the market has indeed gotten tighter than it was.

The second step is to discern what kinds of specialized spaces are being built and what they are replacing. In many cases, new plants with updated technology and automation systems are taking the places of obsolete ones.

In March, Jeep parent company Stellantis shut down its 57-year-old plant in Belvidere indefinitely. The announcement leaves 1,350 workers in limbo at the plant, which in 2019 housed roughly 5,000 employees. Although it is not known what will happen with the facility, there is hope Stellantis or another manufacturer will take the reins and update it for modern automation.

There are plenty of examples where other manufacturers have done just that. Last May, Canadian electric vehicle maker Lion Electric moved into its 900,000-square-foot warehouse in Joliet that was converted into an EV factory to construct commercial trucks and buses.

Additionally, EV maker Rivian Automotive announced in March it's relocating parts of its manufacturing engineering team to its factory, located about 130 miles south of Chicago in Normal, Illinois, that it bought from Mitsubishi in 2017.

Over a year ago, local manufacturer Central Steel & Wire agreed to lease 900,000 square feet in the far southern portion of Cook County. The company is committed to hiring at least 300 people at the Gateway 57 Business Park in University Park when the processing plant is completed this summer.

There is no doubt that Chicago’s market share at making things may be withering, as the data clearly shows more manufacturing and processing plants are exiting the metropolitan area than are moving in, with many of its employees in tow. Thanks to Chicago’s diverse economy, that is okay. There are other industry cohorts, like trade and utilities and professional and business services, that should be able to pick up the slack dropped by the manufacturing sector.