The retail asset class continues to experience growing pains as it evolves in the age of e-commerce. Recent retail trends continued in the Chicago suburbs while there were some winners and some losers.
According to Newmark Knight Frank’s (NKF) Fall 2019 Retail Research Overview, retail activity in the metro was stable during the second half of 2019. Food and beverage tenants performed well, continuing a long-term trend, while big box retailers struggle with lower foot traffic.
Online shopping disrupted brick-and-mortar retail, and yet many of those disruptors are taking an omnichannel approach, opening physical locations. Amazon has opened a series of Amazon Go convenience stores and they are now set to open a “4 Star” store at Oakbrook Center in Oak Brook, Illinois. The storefront, which will only offer items on which online customers have given 4-star reviews, will occupy the former Sears location.
A Life Time Fitness, movie theater and restaurant are now under construction at Oakbrook Center while nearby, Hines is investing $500 million into the redevelopment of a former McDonald’s campus. The mixed-use project will include apartments, condos, a 252-room hotel, three restaurants, office and park space.
The area is also home to a new outlet for Carvana, a Tempe, Arizona-based company that allows consumers to shop, buy and finance cars entirely online, without ever stepping into a physical car dealership. To gain custody of the actual car, buyers can head to 720 Enterprise Drive in Oak Brook, where an eight-level car “vending machine” can hold up to 27 vehicles.
There are currently 200,000 square feet of retail space available in the Oak Brook/Oakbrook Terrace submarket, according to NKF data, with another 100,000 square feet under construction. Asking rents average $25 per square foot and top out at $38 per square foot.
Orland Square Mall has suffered more than its fair share of store closings; however, there’s been a rebound. Von Maur will open by Thanksgiving in the anchor space formerly held by Carson’s. On the promise of creating 225 new jobs, the village of Orland Park offered the Iowa-based department store $8.5 million in incentives.
Carson’s is down but not out. The hamstrung retailer is operating some locations in smaller footprints, open only during peak shopping hours (Thursday through Sunday), with online order pickups still an option on other days. The department store chain is reopening at an outlot position adjacent to the mall.
Half a mile to the north, Orland Park’s Main Street Triangle redevelopment continues to move forward as Structured Development is developing the final nine acres of the 27-acre master plan. The pedestrian-friendly, urban-inspired district will include retail, office, hospitality and entertainment options.
Asking rents in the Orland Park submarket average $37 per square foot, capping at $55 per square foot. There are no other active construction projects underway that would add to the area’s 441,000 square feet of inventory.
Asking rents in the Schaumburg submarket also top off at $55 per square foot, though the average is the lowest of the four suburban locales at $18 per square foot. This is also the largest suburban submarket that NKF profiled, at 750,000 square feet, with nothing new in the pipeline.
The one segment of physical retail that has not only survived the e-commerce evolution but thrived during it is food and beverage. That trend was strong in Schaumburg as openings in recent months by Stan’s Donuts, CityWorks Restaurant, AhiPoke and others absorbed significant space.
Conversely, old department stores and large footprint locations lag across suburban Chicago as big box retailers look to rightsize. Schaumburg, however, has had some success such as Restoration Hardware Outlet moving into the 140,000-square-foot space at the Streets of Woodfield formerly occupied by Carson’s.
Elsewhere, Sierra Trading Post took a 30,000-square-foot former Border’s bookstore. The biggest deal, however, will see At Home take 90,000 square feet and 24 Hour Fitness take another 37,000 square feet at 101 N. Barrington Road. Formerly a Lowe’s home improvement store, the space has been vacant since 2011.
Downtown Skokie is currently undergoing revitalization efforts, as well as new development near the CTA Yellow Line. This is attracting new retail including the adult-focused Ignite Gaming Lounge.
The retail hub for Skokie, however, is Old Orchard mall. Apple, which has been a tenant at Old Orchard since 2003, opened a new store at the mall this quarter. The new space is designed to match other outdoor mall locations and features a plank ceiling and stone walls.
Toms Price announced the opening of The Rug Studio in Skokie this quarter. The furniture store has always carried rugs but claims the new studio will have 10,000 more rugs for consumers to view. This move addresses the trend of homeowner preference for hardwood floors and rugs versus carpeting.
Retail inventory in the Skokie submarket stands at 50,000 square feet with no new construction underway. Asking rents here vary wildly; the average per-square-foot rate is $25, but Skokie has the highest asking rents of the four suburban locations in the NKF report with $72 per square foot.
Developers are working to future-proof shopping centers all throughout the metro area by seeking out tenants that are more resilient to the threat of e-commerce. This includes more experiential offerings such as personal fitness, entertainment and pop up options.
Many in Chicago have confidence that the regional economy and retail market will continue to perform well into the start of 2020 despite political and economic uncertainty. While big box stores and traditional retailers will underperform in some locations, experiential, food and beverage, clicks-to-bricks and fitness tenants will remain more dynamic.