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
| Nov 3, 2014
IIT names winners of inaugural Mies Crown Hall Americas Prize
Herzog & de Meuron's iconic 1111 Lincoln Road parking garage in Miami Beach, Fla., is one of two winners of the $50,000 architectural prize.
| Nov 3, 2014
Cairo's ultra-green mixed-use development will be topped with flowing solar canopy
The solar canopy will shade green rooftop terraces and sky villas atop the nine-story structure.
| Nov 2, 2014
Top 10 LEED lessons learned from a green building veteran
M+W Group's David Gibney offers his top lessons learned from coordinating dozens of large LEED projects during the past 13 years.
| Oct 31, 2014
Dubai plans world’s next tallest towers
Emaar Properties has unveiled plans for a new project containing two towers that will top the charts in height, making them the world’s tallest towers once completed.
| Oct 30, 2014
CannonDesign releases guide for specifying flooring in healthcare settings
The new report, "Flooring Applications in Healthcare Settings," compares and contrasts different flooring types in the context of parameters such as health and safety impact, design and operational issues, environmental considerations, economics, and product options.
| Oct 30, 2014
Perkins Eastman and Lee, Burkhart, Liu to merge practices
The merger will significantly build upon the established practices—particularly healthcare—of both firms and diversify their combined expertise, particularly on the West Coast.
| Oct 29, 2014
Better guidance for appraising green buildings is steadily emerging
The Appraisal Foundation is striving to improve appraisers’ understanding of green valuation.
| Oct 29, 2014
Increasing number of design projects meeting carbon reduction targets, says AIA report
Of the 2,464 projects accounted for in AIA's 2030 Commitment 2013 Progress Report, 401 are meeting the 60% carbon reduction target—a 200% increase from 2012.
Sponsored | | Oct 29, 2014
What’s the difference between your building’s coating chalking and fading?
While the reasons for chalk and fade are different, both occurrences are something to watch for. SPONSORED CONTENT
Sponsored | | Oct 29, 2014
Historic Washington elementary school incorporates modular design
More and more architects and designers are leveraging modern modular building techniques for expansion projects planned on historical sites. SPONSORED CONTENT