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
Contractors | Jul 29, 2015
Consensus Construction Forecast: Double-digit growth expected for commercial sector in 2015, 2016
Despite the adverse weather conditions that curtailed design and construction activity in the first quarter of the year, the overall construction market has performed extremely well to date, according to AIA's latest Consensus Construction Forecast.
University Buildings | Jul 28, 2015
OMA designs terraced sports center for UK's Brighton College
Designs for what will be the biggest construction project in the school’s 170-year history feature a rectangular building at the edge of the school’s playing field. A running track is planned for the building’s roof, while sports facilities will be kept underneath.
High-rise Construction | Jul 28, 2015
Work begins on KPF's 'flared silhouette' tower in Manhattan
The 62-story, 157-unit luxury condo tower widens at the 40th floor, resulting in a gently flared silhouette, accented by a sculpted crown.
Museums | Jul 28, 2015
MUST SEE: Zaha Hadid's latest museum project is built into a mountain
The museum, dedicated to legendary mountaineer Reinhold Messner, is embedded within Mount Kronplatz in northern Italy.
Smart Buildings | Jul 27, 2015
Perkins+Will imagines new opportunity for Atlantic City
The architecture giant believes it has a solution that could put Atlantic City’s existing infrastructure to good use—by turning the Jersey Shore city into a research center for climate change and coastal resiliency.
Retail Centers | Jul 27, 2015
Fish-shaped shopping mall designed for odd plot of land in China
The mall, in Qinshui, a city in China’s Shanxi province, will fit within the 250x30-meter dimensions surrounded by parallel roads and two converging rivers.
Performing Arts Centers | Jul 27, 2015
Vox Populi: Netherlands municipality turns to public vote to select design for new theater
UNStudio’s Theatre on the Parade received nearly three-fifths of votes cast in contest between two finalists.
Multifamily Housing | Jul 27, 2015
Miami developers are designing luxury housing to cater to out-of-town buyers and renters
The Miami Herald reports on several new multifamily projects, including the Paramount Miami Worldcenter, whose homes include maid’s rooms, larger terraces, boutique-size closets, and guest suites.
Architects | Jul 23, 2015
CTBUH recognizes Parkroyal on Pickering as Urban Habitat Award winner
The Singapore hotel has green space galore
Sports and Recreational Facilities | Jul 23, 2015
Japan announces new plan for Olympic Stadium
The country moves on from Zaha Hadid Architects, creators of the original stadium design scrapped last week.