Chicago Area Retail Landlords Weather Uneven Recovery
Life is better for many local retail landlords than it was a year ago, but others are still waiting for the recovery to begin.
The Chicago-area retail vacancy rate was 8.8 percent in the quarter, vs. 8.6 percent in the first quarter and 9 percent a year earlier, according to CBRE Inc.
While the second-quarter vacancy rate was near a five-year low, the market has actually gotten worse, not better, for many landlords since the bust. Since the second quarter of 2008, vacancies have risen in six out of the 12 Chicago-area retail trade areas.
“I think it’s fair to say there has been an uneven recovery,” said Wendell Hollan, first vice president in the Oak Brook office of CBRE.
Two factors have made life difficult for retail landlords. Some suburbs remain burdened with surplus retail space, the result of developers overbuilding during the boom, counting on demand coming from rapid housing growth that fizzled after the crash.
“You ended up with retail that got out ahead of itself vs. retail in more supply-constrained submarkets,” said Derrick McGavic, managing principal at Skokie-based Newport Capital Partners LLC, which has invested in a both city and suburban properties.
Other areas, like the south suburbs, simply suffer from a lack of demand for retail space because they are still struggling to recover from the recession. The south suburban retail trade area had the highest vacancy in the region, 20 percent, up from 15.5 percent in the second quarter of 2008, the biggest increase of any of the 12 submarkets, according to CBRE.
CBRE defines the south suburban submarket as between the Indiana border on the east, roughly Mannheim Road on the west and the city border and Interstate 294 on the north. The submarket terminates just south of the village of Peotone.
In the affluent far north suburbs, a trade area between U.S. Highway 45 on the west, Lake Michigan on the east and the Wisconsin border and roughly Lake Cook Road on the north and the south, the vacancy rate plunged to 7.1 percent in the second quarter, down from 11.5 percent in 2008, the biggest drop in the area over the past five years.
The decline is in part due to a drop in the amount of store space: The total amount of retail space in the far north suburbs dropped 6.5 percent, to 8.3 million in the second quarter from 8.8 million square feet in the second quarter 2008.
The west suburbs, Kane County and north suburbs also saw vacancy rate decreases of at least 1 percentage point.
Except for Kane County, “It’s all but impossible to build new supply, whether it’s housing or retail,” in those areas, Mr. McGavic said, pushing vacancies lower.
Source: ChicagoRealEstateDaily.com Micah Maidenberg August 05, 2013