Expect a solid year for the Chicago-area retail sector in 2013.
That was the message from some of the biggest names in the area’s retail brokerage industry during the 11th annual Commercial Real Estate Forecast Conference held Jan. 22 in Chicago by Illinois Real Estate Journal, Chicago Industrial Properties and Midwest Real Estate News.
Such retail pros as Andy Hochberg, chief executive officer and managing principal with Next Realty; Marlon Stone, executive vice president with Colliers International; Scott Carr, executive vice president with Inland Real Estate Corporation; and Charles Margosian III, senior vice president with Highland Management Associates, Inc., expressed optimism that retailers in Chicago and its suburbs will see a strong year in 2013.
“I think the optimism that we saw at this conference last year regarding retail was justified,” said Stone. “The retailers I worked with experienced gains. Chicago is so desirable. Add to that the lack of new construction and the demand for retail has grown.”
“2012 exceeded our expectations,” Carr said. “What’s appealing to us is that leasing volume has picked up across the spectrum of retailers.”
But there is one type of retailer that is doing especially well today, discounters.
“People are tightening their wallets,” Stone said. “They are living on less. And until that changes, the discounters will continue to expand.”
The panelists at the conference also agreed that the city and suburbs are now seeing a flight to quality among retailers. Retailers that would formerly set up shop in Class-B centers are now, because of lower rents, moving into A-level retail centers. C-level tenants are moving into B-level centers.
This does, though, leave a challenge: Are C-level retail centers still viable? Are there any tenants in this flight to quality that will choose to do business from a C-level retail strip?
These are questions that highlighted one of the prevalent themes of the conference’s retail-focused breakout session: The retail market in the Chicago area is a vibrant and evolving one. The brokers working it, then, rarely suffer through a dull day.
“The difference between an A- and C-level retail center can be half a block,” said Margosian. “That’s a big difference between retail and, say, office. Sharp investors can own an A-class property without spending $400 million for an office tower in downtown Chicago.”
