Chicago Area Retail Vacancy Falls to 9.3%
Chicago-area retail vacancy fell at the sharpest rate in five years during the third quarter, resuming a post-recession comeback that had paused in the first half of 2015.
Landlords had 9.3 percent overall vacancy during the third quarter, plunging from 10 percent in the previous quarter. That’s down from 9.8 percent a year earlier.
The mostly downward move in vacancy since then has been partly the product of what isn’t happening—store closings—combined with new deals.
An improved economy and fewer store closings, combined with several large leases, has continued to push vacancy far below the post-crash high of 12.1 percent in 2010. The low point was 8.6 percent in early 2013, before grocery store chain Dominick’s closed and flooded the market with big blocks of vacant space.
“The past few quarters, we haven’t experienced many chains going out of business,” McCourt said. “While we’re cautiously optimistic, stores typically try to make it through the holidays and then announce store closings. With that in mind, and an uptick in new development, we still need to remain cautious.”
The third-quarter decrease, which followed two consecutive increases in unused store space to open this year, was the largest percentage drop in a period since 2010.
Asking rents increased to $18.07, tops since 2008. The average was $17.91 in the second quarter.
Much of the leasing activity is being driven by furniture and food.
Five of the eight largest leases signed during the third quarter were with furniture chains, according to CBRE. Bob’s Furniture signed deals in Villa Park, Schaumburg, Aurora and Skokie, all for at least 26,000 square feet. In the second-largest deal of the quarter, Art Van Furniture added a 71,400-square-foot space in a former Dominick’s store in Schaumburg.
Big R Stores had the largest third-quarter lease, filling a 119,000-square-foot former Target store in McHenry.
The third-largest deal was for a 69,246-square-foot Mariano’s Fresh Market grocery store in a former Dominick’s in Bloomingdale. Mariano’s, whose Milwaukee-based parent Roundy’s is being acquired by Cincinnati-based Kroger, also opened two new stores in Glenview and one in Northbrook during the third quarter. It has already opened another in Lincoln Park early in the fourth quarter.
Already in the fourth quarter, Fresh Thyme Farmers Market, which also offers many to-go meals, has opened stores in Lincoln Park, Crystal Lake and Naperville.
Mariano’s expansion in Chicago has partly been fueled by its large prepared-foods sections. Prepared foods from grocery stores, as well as meals from fast casual restaurants, continue to thrive, McCourt said.
“That category is incredibly active in both the small shop and big-box side,” McCourt said. “There’s a significant increase in foods tenants as consumers’ habits have changed, both in how they shop for groceries and how many times they’re eating out.”
The most heavily populated areas of the city and the closer-in suburbs continue to outpace far-flung areas of the Chicago market. The area that includes downtown and the North Side of Chicago had just 3.3 percent vacancy. The highest vacancy was in the south suburbs, with 16.2 percent vacancy, and far north suburbs, at 14.3 percent.
Downtown deals signed in the quarter included a 15,400-square-foot Walgreens drugstore in the former Sears flagship space on State Street. In one of the most visible deals, Apple has a deal to move its Michigan Avenue store south to a new glass structure that will be added onto the existing office property at 401 N. Michigan Ave. along the north bank of the Chicago River.
Source: ChicagoRealEstateDaily November 23rd, 2015 Ryan Ori