Developer-Led Retail Making a Comeback
The Chicagoland retail construction market experienced an explosion between 2000 and 2007, headed by both individual big box retail stores and power centers. This pre-recession period has been characterized as a “Race for Space”.
During the Great Recession though, this boom of activity slowed to a snail’s pace as big box retailers and developers either reduced or halted construction activities. In 2010, retail vacancy in Chicago peaked at just over 12 percent.
However, the past 18 months have seen an influx of developer-led retail construction projects. Much of this increased activity can be attributed to the 2013 closing of Oak Brook based Dominick’s supermarkets, which made over 4 million square feet of space available to the market. With most of these locations being picked up by grocery chains such as Whole Foods, Mariano’s, Pete’s Fresh Market, Joe Caputo & Sons and Jewel Osco, more than half of the space vacated during the final quarter of 2013 has been absorbed, according to the Chicago Retail Research Report published by Marcus & Millichap. The report goes further to anticipate that
By the end of 2014, vacancy will return to levels before the Dominick’s closings, and within a year the vast majority of the former locations will have new occupants.”
Furthermore, despite the hype around online shopping’s exponential growth potential, developers are signing retail lease agreements and are committing resources to construct or renovate. Retail investment is perhaps more cautious and not yielding the same lease returns as during the pre-recession construction boom, but many construction projects are moving forward. In particular, grocer anchored power centers can be seen under construction all around Chicagoland. And with that, retail excitement is definitely returning!