For those listening for the death knells of retail, the deafening sound of a strong economy has drowned them out. The speakers at the 9th annual Chicagoland Retail and Mixed-Use Summit all agreed that brick-and-mortar retail is changing, but it certainly isn’t dying.
Keith E. Lord, president, manager and managing partner of The Lord Companies moderated the first panel, looking at the state of the market. He was joined by Mike Demetriou, president and broker at Baum Realty Group; John C. Melaniphy, III, director of economic development at the Village of Wheeling; Sarah Shaw, shareholder at Vedder Price; Bryant Siragusa, vice president, national restaurant and entertainment leasing at Starwood Retail Partners and Ellie Whitlock, managing director, commercial real estate at CIBC.
Melaniphy kicked things off with hard numbers, noting that food and restaurant retail uses are up, but apparel is down. “But general merchandise in the Chicago area is up 5.1%.” Melaniphy said.
Much of this is due to a strong economy. Yes more shoppers are moving online, but not enough to snuff out physical stores. Since the bull market can’t last forever, the experts looked at ways that owners and developers are rebooting retail space to stay relevant in the market. Malls in particular are in flux, as filling their vast square footage has become more challenging.
“These centers used to be places to buy something. We need to make them a place to DO something,” said Siragusa. “I don’t think malls are going to die. Any mall that’s on good dirt will upgrade to a higher, better use.”
When malls do reboot, they bring a bevy of legal issues. For example, some tenants might have no-build, exclusivity, parking and other usage clauses in their leases that prevent meaningful development. If a brokerage has one of these tenants as a client, however, these clauses can be very valuable, providing leverage during negotiations.
When a developer looks to redevelop a retail space within a mall or power center location, “they are going to have to take a long, hard look at restrictions, such as parking and co-tenancy,” Shaw said. Overarching all of that are the zoning laws.”
The Development, Design, Construction and Management Trends in Retail & Mixed-Use panel was moderated by Scott Gendell president and CEO of Terraco, Inc. His panelists included Keith Campbell, vice president at CallisonRTKL; Michael Hayford, director of Midwest business development at Kastle Systems; Michael Hillebrenner, principal engineer at Roux Associates; Rick Tonielli, senior energy efficiency program manager for ComEd Energy Efficiency Program and Leon Walker, Esq., manager at DL3 Realty, L.P.
With the recent bombshell that Rahm Emanuel would not be seeking another term as Mayor of Chicago, Gendell asked the panel reflect on his legacy, specifically as it relates to commercial real estate. The panel took different stances on policies that his administration has championed, including the TOD ordinance, the Neighborhood Opportunity Fund and usage of TIF funds.
“We have 60+ cranes in the sky, but Chicago is a city of neighborhoods,” Walker said. “If you can’t connect them all, you’re going to have a hard time.”
Campbell looked to corporate relocation efforts and burgeoning neighborhoods like Lincoln Yards as good for retail, as the sector lives or dies by consumers. “We need to increase the number of people living in Chicago and increase the great places to live in Chicago,” he said.
Walker agreed, saying, “You need feet to put shoes on, stomachs to feed and backs to put clothes on. Demographics still drive all of this.”