Q2 2012 Chicago, Illinois Retail Submarket Trends

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Q2 2012 Chicago, Illinois Retail Submarket Trends

Since Reis data covers shopping centers of the type that tends to be owned and underwritten by individual investors, it excludes street retail in the City of Chicago and other older urban areas, and also excludes Downtown. The Reis data cited below is for neighborhood and community centers. The City of Chicago is divided into North and South submarkets. Recent retail trends have been driven by the rush of national retailers into previously neglected urban neighborhoods and ongoing development on the exurban fringe. Established suburbs, densely developed with existing retail, have seen less recent retail action.

City of Chicago

  • Reis reports an average asking rent of $16.71 psf for 3.4 million square feet of anchor space in the North submarket, the highest among 12 submarkets in the metro area, and an average asking rent of $25.93 psf for 2.8 million square feet of non-anchor space, also the highest. The vacancy rates are 4.7% for anchor space, second lowest among the submarkets, and 6.8% for non-anchor space, the lowest metrowide.
  • The overall vacancy rate plunged 80 basis points in the second quarter of 2012 to 5.6%, on 50,000 square feet of net absorption. Both the average asking rent and the average effective rent edged down 0.1% during the quarter, the latter to $23.54 psf. Rents are down 0.3% from a year earlier by both measures.
  • Despite limited under-construction activity, and no space is expected to be added this year, Reis predicts nearly 400,000 square feet of community-neighborhood space will complete construction here from 2013 to 2016.
  • In its North Chicago submarket, Colliers reports a vacancy rate of 9.6% and a weighted average quoted lease rate of $18.27 psf for 8.5 million square feet of shopping center space. For 59.6 million square feet of “General Retail,” this source reports a vacancy rate of 5.7% and a weighted average quoted lease rate of $19.04 psf.
  • “Noteworthy transactions included Tourbillon’s leasing of 16,000 square feet at 543 North Michigan Avenue,” Colliers reported.
  • “One of the most anticipated developments planned to open in the 4th quarter of this year is the redevelopment of the old Esquire Theatre,” according to Colliers. The property is in the River North area. “Luxury retailers have already leased space in the development that includes tenants such as Christian Louboutin, Buccellati Inc., and Del Frisco’s Double Eagle Steak House.”
  • Burlington Coat Factory leased 60,000 square feet of “General Retail” space at 1 North State Street in the Central Loop area, according to Cushman & Wakefield. Swatch leased 15,000 square feet of general retail at 545 North Michigan Avenue.
  • For 3.5 million square feet of anchor space in the South submarket, the vacancy rate is 1.9%, the lowest among the submarkets, and the asking rent is $13.67 psf, the second highest, according to Reis. The vacancy rate is 13.9% and the average asking rent is $20.94 psf for 2.9 million square feet of non-anchor space, second highest metrowide.
  • The overall vacancy rate fell 10 basis points during the quarter to 7.3%. It is down 70 from a year earlier. Both the average asking rent and the average effective rent decreased 0.4% during the quarter, the latter to $18.61 psf. Rents are up 0.3% asking and 0.5% effective from a year earlier.
  • The 160,000-square-foot second phase of the Chatham Market community center completed construction on South Holland Road in August. An additional 337,000 square feet of community-neighborhood center space is expected to be added here through 2016, though none is under construction.
  • The 400,000-square-foot first phase of the Pullman Park power center is under construction an 111th Street and the Bishop Ford Expressway., in Reis’ “Far South” submarket. Its completion date is now uncertain.
  • In its South Chicago submarket, Colliers reports a vacancy rate of 8.4% and a weighted average quoted lease rate of $17.90 psf for 9.0 million square feet of shopping center space. For 32.4 million square feet of “General Retail,” this source reports a vacancy rate of 6.1% and a weighted average quoted lease rate of $16.08 psf.”
  • “One of the most prominent acquisitions of the quarter was the purchase of a 276,975-square-foot shopping center called Block 37, a besieged downtown shopping mall in the Central Loop,” according to Colliers. “Retailers began vacating once the property went into foreclosure which resulted in a vacancy rate of 70% for the building’s retail component. CIM Group, LP purchased Block 37 from Bank of America this quarter for $302.91 psf and are discussing plans to turn the project into a blues themed center with a blues museum, nightclub, and musical classes.”

Close-in Suburbs: Arlington Heights and Far North Submarkets

  • The Arlington Heights submarket extends from that town south of the area near O-Hare airport. The 4.4 million square feet of anchor space in the Arlington Heights submarket has a vacancy rate of 12.5%, highest among the submarkets, and an asking rent of $11.58 psf, Reis reports. The 4.6 million square feet of non-anchor space has a vacancy rate of 10.9% and an average asking rent of $16.88 psf.
  • The overall vacancy rate rose 10 basis points during the quarter to 11.7%. Both the average asking rent and the average effective rent rose 0.2%, the latter to $14.78 psf. The asking average is up 1.1% from a year earlier, with the effective average up 1.4%.
  • The 550,000-square-foot Fashion Outlets of Chicago outlet center broke ground in July for completion in September 2013. “The 550,000-square-foot discount luxury shopping center is already more than 60 percent leased,” according to Colliers. The 150,000-square-foot Randhurst Mall lifestyle center is under construction. It is partially open, with additional openings ongoing, but its final completion date is uncertain.
  • Colliers reports a vacancy rate of 7.8% and a weighted average quoted lease rate of $15.01 psf for 9.5 million square feet of all retail space in its O’Hare submarket.
  • “La Rosita renewed its 30,000-square-foot lease at 500-554 East North Avenue in Glendale Heights and American Academy of Gymnastics relocated into 30,000 square feet in the former Brunswick Zone building in Palatine,” according to Colliers.
  • “One of the most talked about retail projects in this area opened its doors for business during the second quarter,” according to this source. “The Park at Rosemont is a 200,000-square-foot entertainment complex that holds tenants such as Toby Keith’s I Love This Bar & Grill and King’s Lanes & Lounge bowling alley.”
  • The Far North submarket includes the affluent suburbs within Cook County north of the City of Chicago along Lake Michigan. For 4.3 million square feet of anchor space there, Reis reports a vacancy rate of 5.0% and an asking rent of $13.54 psf, the highest in the suburbs and third highest metrowide. For 4.0 million square feet of non-anchor space, the vacancy rate is 10.9%, and the average asking rent is $20.67 psf, third and the highest in the suburbs.
  • The overall vacancy rate of 7.8% was down 40 basis points from the prior quarter and down 50 from a year earlier. Rents edged down 0.1% by both measures, with the effective average at $18.77 psf. The asking average is down 1.1% from a year earlier, with the effective average down 0.9%.
  • In its North submarket, Colliers reports a vacancy rate of 7.8% and a weighted average quoted lease rate of $17.02 psf for 51.6 million square feet of all retail. This includes 16.5 million square feet of “general retail” and 10.7 million square feet of regional mall space.
  • Harlem Furniture renewed for 23,400 square feet at 701 N. Milwaukee Avenue, Vernon Hills, according to this source.

Southwest

  • The Southwest submarket extends south of I-55 from slightly west of Midway Airport down toward Joliet. Retail development was extensive here during the 2000s, but the recession brought it to a near halt.
  • The 400,000-square-foot Mokena Marketplace power center is expected to complete construction in Mokena in October. The 107,000-square-foot second phase of the “Romeo Village Development” power center remains under construction at Weber and Airport roads in Romeoville for an April 2013 delivery. Another large project waylaid by the recession, the 900,000-square-foot Cedar Crossing, now has an October groundbreaking date for its first phase.
  • According to Reis, the vacancy rate here is 5.3% for 4.7 million square feet of anchor space and 15.4% for 4.0 million square feet of non-anchor space. The overall vacancy rate of 9.9% was down 70 basis points in the second quarter on 56,000 square feet of net absorption, bringing the half-year total to 156,000 square feet.
  • The average asking rent is $10.19 psf for anchor space, lowest among the submarkets, and $16.85 psf for non-anchor space. The asking rent and the average effective rent increased 0.4% in the second quarter, the latter to $14.72 psf. The year-over-year gains are 0.8% and 1.2%, respectively.
  • For 83 million square feet of all types of retail in its South Suburban submarket, Colliers reports a vacancy rate of 9.6% and an overall weighted quoted lease rate of $15.25 psf.

Far Western Suburbs/Far West; Kane County

  • Reis reports a vacancy rate of 10.1% for 6.1 million square feet of anchor space, and 16.5% for 5.5 million square feet of non-anchor space, in the Far West submarket. Respective asking rents are given as $11.65 psf and $19.29 psf.
  • The overall vacancy rate of 13.1% decreased 50 basis points during the quarter but is up 100 from a year earlier. The average asking rent fell 0.2%, with the average effective rent down 0.1% to $16.66 psf, during the quarter. The decrease from a year earlier is 0.4% by both measures.
  • In Kane County, according to Reis, the vacancy rate is 10.3% and the average asking rent is $11.96 psf for 3.9 million square feet of anchor space. For 3.8 million square feet of non-anchor space, a vacancy rate of 12.5% and an average asking rent of $17.12 psf are reported.
  • The vacancy rate rose 20 basis points in the second quarter, and it is 100 basis points higher than a year earlier. Rents rose 0.1% by both measures in the second quarter, but are down by 1.3% asking and 1.2% effective (to $14.72 psf) year-over-year.
  • Ross Dress for Less leased 24,000 square feet at 1660 S. Randall Road in Geneva, according to Colliers.
  • “The Western East/West Corridor remained steady with only slight positive changes,” according to this source. “Vacancy this quarter was reduced by 0.2% to 11.2% as compared to second quarter 2011. Net absorption remained positive with 118,596 square feet and weighted average lease rates at $15.94 psf, down $0.11 from last year.”

Far Northern Suburbs: Lake-McHenry

  • The Lake-McHenry submarket includes those two counties along the Wisconsin border. There, the 7.8 million square feet of anchor space has a vacancy rate of 9.8% and an average asking rent of $12.60 psf according to Reis, while the 7.1 million square feet of non-anchor space has a rate of 15.7% and a rent of $20.45 psf.
  • The overall vacancy was unchanged in the second quarter at 12.7%, but it is down 30 from a year earlier. The average asking rent fell 0.1% during the quarter, with the average effective rent down 0.2% to $18.20 psf. Rents are up 0.3% asking and 0.4% effective year-over-year.
  • The 94,450-square-foot Sunset Grove Shopping Center neighborhood center is under construction in Long Grove, and the 128,900-square-foot Great Lakes Crossing neighborhood center is under construction in Zion. Reis predicts more than 450,000 square feet of community-neighborhood shopping center space will complete construction in this submarket from 2013 to 2016.
  • For 81 million square feet of all types of space in its Northwest submarket, Colliers reports a vacancy rate of 10.6% and a weighted average quoted lease rate of $14.79 psf.