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, 2010
Park’s green education center a lesson in sustainability
The new Cantigny Outdoor Education Center, located within the 500-acre Cantigny Park in Wheaton, Ill., earned LEED Silver. Designed by DLA Architects, the 3,100-sf multipurpose center will serve patrons of the park’s golf courses, museums, and display garden, one of the largest such gardens in the Midwest.
| Nov 3, 2010
Public works complex gets eco-friendly addition
The renovation and expansion of the public works operations facility in Wilmette, Ill., including a 5,000-sf addition that houses administrative and engineering offices, locker rooms, and a lunch room/meeting room, is seeking LEED Gold certification.
| Nov 3, 2010
Sailing center sets course for energy efficiency, sustainability
The Milwaukee (Wis.) Community Sailing Center’s new facility on Lake Michigan counts a geothermal heating and cooling system among its sustainable features. The facility was designed for the nonprofit instructional sailing organization with energy efficiency and low operating costs in mind.
| Nov 3, 2010
Seattle University’s expanded library trying for LEED Gold
Pfeiffer Partners Architects, in collaboration with Mithun Architects, programmed, planned, and designed the $55 million renovation and expansion of Lemieux Library and McGoldrick Learning Commons at Seattle University. The LEED-Gold-designed facility’s green features include daylighting, sustainable and recycled materials, and a rain garden.
| Nov 3, 2010
Recreation center targets student health, earns LEED Platinum
Not only is the student recreation center at the University of Arizona, Tucson, the hub of student life but its new 54,000-sf addition is also super-green, having recently attained LEED Platinum certification.
| Nov 3, 2010
New church in Connecticut will serve a growing congregation
Tocci Building Companies will start digging next June for the Black Rock Congregational Church in Fairfield, Conn. Designed by Wiles Architects, the 103,000-sf multiuse facility will feature a 900-person worship center with tiered stadium seating, a children’s worship center, a chapel, an auditorium, a gymnasium, educational space, administrative offices, commercial kitchen, and a welcome center with library and lounge.
| Nov 3, 2010
Senior housing will be affordable, sustainable
Horizons at Morgan Hill, a 49-unit affordable senior housing community in Morgan Hill, Calif., was designed by KTGY Group and developed by Urban Housing Communities. The $21.2 million, three-story building will offer 36 one-bed/bath units (773 sf) and 13 two-bed/bath units (1,025 sf) on a 2.6-acre site.
| Nov 3, 2010
Designs complete for new elementary school
SchenkelShultz has completed design of the new 101,270-sf elementary Highlands Elementary School, as well as designs for three existing buildings that will be renovated, in Kissimmee, Fla. The school will provide 48 classrooms for 920 students, a cafeteria, a media center, and a music/art suite with outdoor patio. Three facilities scheduled for renovations total 19,459 sf and include an eight-classroom building that will be used as an exceptional student education center, a older media center that will be used as a multipurpose building, and another building that will be reworked as a parent center, with two meeting rooms for community use. W.G. Mills/Ranger is serving as CM for the $15.1 million project.
| Nov 3, 2010
Chengdu retail center offers a blend of old and new China
The first phase of Pearl River New Town, an 80-acre project in Chengdu, in China’s Wenjiang District, is under way along the banks of the Jiang’an River. Chengdu was at one time a leading center for broadcloth production, and RTKL, which is overseeing the project’s master planning, architecture, branding, and landscape architecture, designed the project’s streets, pedestrian pathways, and bridges to resemble a woven fabric.
| Nov 3, 2010
Rotating atriums give Riyadh’s first Hilton an unusual twist
Goettsch Partners, in collaboration with Omrania & Associates (architect of record) and David Wrenn Interiors (interior designer), is serving as design architect for the five-star, 900-key Hilton Riyadh.