According to a new report from Mid-America Real Estate Corp.’s Urban Team, much of Chicago lacks the type of product that today’s downsized big box retailers—or “mid-box”—are looking for.
“Retailers’ footprints are shrinking,” says Mid-America Principal Dan Tausk, author of the report. “From Wal-Mart to Best Buy to Office Depot, we continue to see a national trend toward shrinking square footage, which is expanding the vernacular from ‘super’ or ‘mega’ stores to include ‘market,’ ‘express’ and ‘neighborhood’ stores. If that trend continues—and I expect it to—then we’ve got a real lack of product to offer them in most of urban Chicago.”
Because of the national trend in retailer downsizing, Mid-America undertook its first “Urban Chicago Mid-Box Retail Study” this summer to create a better barometer of supply and demand in this sector. The team defined City limits and all directly neighboring suburbs into eight zones roughly following existing retail trade areas.
The team then examined existing and vacant space for stores between 15,000 and 50,000-sf, excluding proposed new development that hadn’t been delivered. To get a clearer picture of category activity, the team also excluded Chicago’s dense penetration of urban drugstores, typically 10,000 to 14,000-sf, but included the newer large format “market” drugstores that are between 25,000 and 30,000-sf. The study uncovered nearly 11.2 million square feet of existing supply in the mid-box category, or 389 total spaces. It also discovered a vacancy rate in this size category at 7%, with strong absorption of existing vacancy.
While it was not surprising to find that Central City (Zone 1)—with State Street, Michigan Avenue and Lincoln Park—carries 34% of the mid-box supply and only 8.6 % of the population, it was a surprise for Tausk to see that pockets of densely populated, high income submarkets such as Lincoln Square, River Forest, Streeterville, West Loop and Bucktown have virtually no mid-box retail supply in this size range. While Zone 5 (the Northeast City) holds the highest percentage of the population in the study, 20.4%, it holds only 9.5% of the mid-box supply.
“The average amount of mid-box retail in urban Chicago is 3.5 square feet/person,” says Tausk., “Zone 1 (Central City) shows 14.6 square feet/person while Zone 5 shows the lowest in Chicago of 1.2 square feet/person. That’s a wide disparity of haves and have-nots.”
He says the residential density in Zone 5 is obviously high enough to support more retail with residents. But he suggests that because the price of land here is high and land size is limited, retailers are pushed to accept multi-level buildings, which are lacking in this zone. “Right now, it’s difficult for them to expand here, despite the desirable demographics,” he says.
Overall, according to the report, five of the eight zones show that almost every category of mid-box retail is underserved for similar reasons -- from grocery and apparel to electronics and discount. The three zones that are doing best are Central City (Zone 1) with 14.6 square feet/person, Near Southwest Suburban (Zone 7) with 5.7 square feet/person, and Near West Suburban (Zone 8) with 4.4 square feet/person.
As was similarly indicated in Mid-America’s Urban Grocery Study last year, the West City (Zone 2) is the most underserved with only 16 mid-box retail stores or 4.11% of Chicago’s total supply. “In addition,” Tausk says, “the West Side has the least amount of category options. While each zone’s dominant category is grocery, that category averages only + 20% Citywide. In the West City, however, grocery accounts for 53% of the mid-box retail, showing a void of other shopping options.”
Other category highlights:
- Zone 1 (Central City) showed a dominating penetration of apparel versus all other zones combined. State Street and Michigan Avenue, and Lincoln Park carry the most supply. Zone 1 also dominates in the home furnishings category with 12 mid-box retail stores, as well as electronics with 9 and office supply with 6.
- Zone 2 (West City), as already noted above, is void of shopping options in most categories other than grocery. There is plenty of affordable, developable land, but lower incomes and high crime rates continue to stall development.
- Zone 5 (S/SE City) has a large number of grocers totaling 35% of all mid-box categories in that zone. Category sales clearly bleed from the south and southeast side to the Southwest City or Southwest suburbs, due to lack of options in other retail categories.
“In conclusion,” says Tausk. “There’s demand for mid-box growth in urban Chicago, despite a tough economy.” However, existing supply is tight everywhere and almost non-existent in the most attractive zones. He adds that there are three main considerations retailers will be forced to evaluate in the process.
- Retailers with expansion/rollouts for Chicago will need to continue to think creatively, finding opportunities in multi-levels, mezzanines or even smaller stores to meet future demand.
- Retailers can expect rents to remain high in the mid-size sector due to obvious lack of supply and low vacancy.
- Future opportunity in this mid-box size category may best come from downsizing / sublease space or the splitting of outdated larger footprints and future bankruptcies of other retailers.
Absorption in this size range is strong and happens quickly with greater than a half-million square feet of leasing currently proposed in existing space.
From the supply side, Tausk says that based on this supply/demand dynamic, “we can expect to see a slow but steady flow of new projects in this size range. Several developments are underway currently that are focused on the 15,000 to 50,000-sf user. Mid-box retailers such as Ross Dress for Less, Marshalls, Michaels, WalMart Market, hhGregg and Planet Fitness continue to pursue active expansion across Chicagoland.” +
Related Stories
AEC Innovators | Aug 27, 2019
7 AEC industry disruptors and their groundbreaking achievements
From building prefab factories in the sky to incubating the next generation of AEC tech startups, our 2019 class of AEC Innovators demonstrates that the industry is poised for a shakeup. Meet BD+C’s 2019 AEC Innovators.
Giants 400 | Aug 16, 2019
2019 Healthcare Giants Report: The ‘smart hospital’ is on the horizon
These buildings perform functions like a medical practitioner. This and more healthcare sector trends from Building Design+Construction's 2019 Giants 300 Report.
AEC Innovators | Aug 15, 2019
Oracle’s replica of a construction jobsite creates an immersive environment for AEC professionals
The Oracle Construction and Engineering Innovation Lab allows visitors to walk through five different stages of construction work, to test new AEC technologies and training techniques.
Giants 400 | Aug 15, 2019
Top 140 Multifamily Sector Architecture Firms for 2019
Humphreys & Partners, KTGY, SCB, CallisonRTKL, and Perkins Eastman top the rankings of the nation's largest multifamily sector architecture and architecture engineering (AE) firms, as reported in Building Design+Construction's 2019 Giants 300 Report.
Giants 400 | Aug 13, 2019
2019 Science + Technology Giants Report: Operational flexibility is a must for S+T buildings
The science and technology (S+T) sector is arguably the industry’s most complex because it caters to a diverse clientele with specific priorities and imperatives, according to Building Design+Construction's 2019 Giants 300 Report.
Architects | Aug 12, 2019
AIA, NCARB help launch coalition to represent complex professions and licensing boards
Architects, registration boards, and others join effort to ensure a unified voice for professions in growing debate around licensure, regulation, and public safety.
AEC Innovators | Aug 9, 2019
Improving architectural designs through iteration
Computational design lets ZGF Architects see patterns that renderings and even models can’t show.
Giants 400 | Aug 8, 2019
Top 200 Office Sector Architecture Firms for 2019
Gensler, AECOM, Perkins+Will, Stantec, and HOK top the rankings of the nation's largest office sector architecture and architecture engineering (AE) firms, as reported in Building Design+Construction's 2019 Giants 300 Report.
Giants 400 | Aug 8, 2019
2019 Office Giants Report: Demand for exceptional workplaces will keep the office construction market strong
Office space consolidation and workplace upgrades will keep project teams busy, according to BD+C's 2019 Giants 300 Report.
Museums | Jul 29, 2019
A new museum debuts inside the Empire State Building
A $165 million, 10,000-sf museum opened on the second floor of the Empire State Building in New York City, completing the second of a four-phase “reimagining” of that building’s observatory experience, which draws four million visitors annually.