HEARTLAND SNAPSHOT, DECEMBER 2006

Suburban Chicago Retail Market

Major trends in Suburban Chicago’s retail sector include the relocation of mall-based tenants due to high rents, taxes, common area maintenance and insurance, as well as video-based retailers such as Blockbuster and Hollywood Video vacating space in the market due to obsolete business models. Although big box tenants are very active, rising material costs have put pressure on developer’s returns, as anchor tenants continue to demand lower rents. Second-generation space is harder to lease because of shifting markets and new developments, while new developments are surfacing in greener markets counting on future population growth.

Active retail developers include McVickers Development, Bradford, Ryan Companies, V-Land Corporation, Mid-America Development Partners and Edgemark. The market has seen the addition of several new retailers including Massage Envy, CiCi’s Pizza, Del Taco, Lucy and 2nd Wind Exercise. Also JC Penney is bringing its new stand alone store format to the market.

Significant development is occurring throughout the area, including a Wal-Mart Supercenter and a Menards in New Lenox; a Target and Lowe’s Home Improvement Warehouse in Antioch; a Wal-Mart and Lowe’s at the intersection of Randall and Bowes roads; and a Wal-Mart, Lowe’s and JC Penney in Oswego. Other areas experiencing increased activity include Yorkville, North Aurora and the intersection of Interstate 355 and 159th Street in Lockport.

The majority of development continues to be in Illinois’ growth suburbs such as Oswego, Antioch, Lake Zurich, Algonquin, Homer Glen, New Lenox, Yorkville and Lockport.  This development is largely due to population growth in these areas, as well as the expansion of I-355.

The new extension of I-355 from Interstate 55 to Interstate 80 is opening up land for future developments throughout the suburban area. More than 3 million square feet of retail is planned in New Lenox, Lockport and Homer Glen to absorb the newly opened space.

As vacancy rates inch towards 10 percent, some notable lease transactions in the market include JP Morgan Chase Bank’s 44,866-square-foot deal in Orland Park; Aldi Foods’ 16,512-square-foot lease in Woodstock; Fifth Third Bank’s lease of 28,000 square feet in Carpentersville; and Silvestri Sweets’ 24,627-square-foot lease in Geneva.  Additionally, Office Depot has leased four locations totaling more than 80,000 square feet, The Sports Authority leased 40,000 square feet in Willowbrook, and La-Z-Boy has leased 20,000 square feet in Lake Zurich and 13,000 square feet in Oak Brook.

Christmas retail activity, especially sales, should be closely monitored and could affect growth in 2007. Also, declines in the housing sector may impact future growth to the suburban communities.

— Mike Wesley is a managing principal at Edgemark Commercial Real Estate Services in Oak Brook, Ill.

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