Chicago Area Retail Vacancy Lowest Level in Five Years
Chicago Area Retail Vacancy Rate has fallen to its lowest level in five years, another small step in a slow recovery for landlords still smarting from the recession.
After stalling late last year, the Chicago-area retail vacancy rate declined to 8.6 percent in the first quarter, down from 8.7 percent in the fourth quarter and 9.3 percent a year earlier, according to Los Angeles-based CBRE Inc.
The local vacancy rate has now declined in every quarter but the fourth quarter of last year since peaking at 12.1 percent in early 2010. The vacancy rate hasn’t been as low as it was in the first quarter since the first quarter of 2008, when it was 7.9 percent.
The gains, however, aren’t evenly distributed, with tenants focusing their expansion efforts on higher-end properties in the city and wealthier suburbs. Retail developers who bet on continued housing growth before the housing crash remain in a bind.
“The challenges are still in the further-reaching suburbs, in the periphery, where housing development was significant pre-recession,” , first vice president VP CBRE. “Those areas have started to make a comeback but they are the last to rebound. There’s still housing inventory that needs to be worked through.”
Tenants see denser areas as more attractive bets. Retailers are battling for spaces in city strips like the Clybourn Corridor near Lincoln Park and along Roosevelt Road in the South Loop, Mr. Williams said, allowing landlords to hike rents.
Average net asking rents hit $17.07 a square foot in the first quarter, up from $16.65 in the fourth quarter and $16.67 a year earlier, according to CBRE.
“We’re seeing competition for space today and competition for vacant space we didn’t see a couple of years ago,” said Robert Nadler, president of the central region for New Hyde Park, N.Y.-based mall owner Kimco Realty Corp. At the best malls, landlords now have the upper hand during lease negotiations, Mr. Nadler said.
Kimco is boosting its investment here. The firm recently bought out its joint venture partner, UBS A.G., in the Shops at Kildeer, a 168,000-square-foot shopping center in its namesake northern suburb, paying $32.7 million for the bank’s 81 percent stake. The venture paid $47.3 million for the property in 2006. Kimco now has 39 properties in Illinois, 30 in the Chicago area, according to its website.
Kimco has signed several new leases at Hawthorn Hills Square, a 193,000-square-foot mall in Vernon Hills it acquired for $37.5 million last October. New tenants include Bolingbrook-based Ulta Salon Cosmetics & Fragrance Inc., which leased 10,000 square feet.
Retailers that sell necessities, such as grocers, discounters like dollar stores and luxury companies appealing to bigger spenders are among the most active tenants in the market right now, Mr. Nadler said. Restaurants and fast-casual restaurants like Chipotle also are expanding, he said.
He dismisses concerns about weaker retailers like Kmart closing up shop, saying Kimco could take such spaces and re-rent them at better rates.
ChicagoRealEstateDaily Micah Maidenberg April 22, 2013