Mixed-use buildings with traditional storefronts have always been a part of local neighborhood history in Chicago. However, during the last 5 years, the residential boom has generated mixed-use developments on heavily traveled commercial streets and thoroughfares in areas like Lincoln Park, Lakeview, Roscoe Village and the emerging Uptown neighborhood.

Scott Maesel Broker Century 21 Sussex & Reilly Commercial Properties

These mixed-use projects are typically built in areas that are zoned for business and commercial uses, and are therefore required to have commercial spaces on the first floor. Few mixed-use developers understand the value of these commercial spaces and, as a result, build them strictly as a right of the zoning ordinance. This approach has led to small and undesirable spaces. To combat this problem, the Chicago Zoning Department has recently issued minimum size and height requirements to improve the quality of retail space. “Developers that embrace these changes are beginning to realize the rewards of viable commercial spaces,” says Scott Maesel, a broker with Chicago-based Century 21 Sussex & Reilly Commercial Properties.

Today’s developers have two options for using the commercial space as a profit center. First, they can sell these spaces as commercial condominiums — space that is typically located on the first floor beneath the residential condos — for realized profits, which can be exchanged into a future project or for cash on hand. Examples of typical purchasers of commercial condominiums in Chicago area neighborhoods include an insurance agent in Lincoln Park at 1532 W. Fullerton, a mortgage broker in Lakeview at 1808 W. Belmont and an income tax consultant in Northcenter at 4051 N. Damen.

The second option — to attract national retailers that can provide developers with long-term cash flow — is best for developers that have projects on main neighborhood arteries. However, the criteria to attract top-level national retailers is not based on location alone. Amenities, such as commercial parking, attractive storefronts and ample signage, will determine the retailer’s interest and top per-square-foot rents.

Also, interior space is just as important as the exterior of a building. “We frequently educate predominantly residential developers on what national retailers expect in their ‘vanilla boxes,’” Maesel says. Tenants expect interior components such as specific mechanicals and ceiling types and an ADA-compliant bathroom. Successful national retailers, with long-term leases, capital improvements and a proven track record, may also seek rent abatement or a tenant improvement allowance.

National retailers that have recently occupied neighborhood properties include Subway at 760 Ogden in Riverwest, Chipotle at 1025 W. Belmont in Lakeview and Washington Mutual at 3556 N. Southport in Lakeview. Quizno’s and Walgreens have also been active in the area. The most aggressive retailers new to the Chicagoland area include CVS/pharmacy, Washington Mutual and Curves. “These retailers want Chicago neighborhoods with strong residential demographics and other national retailers nearby,” Maesel says.

National retailers have a large impact upon vacancy rates and neighborhood retail growth. Traditionally, there are low vacancy rates on streets where national retailers are located because start-ups and regional retailers follow their lead. For example, on Chicago’s north side, the Armitage shopping corridor and Southport Avenue from Roscoe Avenue to Grace Avenue are both experiencing low vacancy rates. This stretch of Southport has recently seen local developers building new construction mixed-use condominium developments. The tenants on this street are a mix of regional retailers, such as Julius Meinl and Krista-Kay, and local specialty retailers. Due to the influx of such retailers during the last several years, the vacancy rate has fallen to less than 10 percent. Growth is also occurring in the neighborhood area of Uptown, which was recently established as a retail hot spot by the new Borders Books & Music. The store is being redeveloped in a former Golblatt’s building.

Commercial condominiums occupied by local neighborhood entrepreneurs and strong national retailers satisfy the needs of residents, neighborhood associations and community groups. Whether for-sale or for-lease, commercial condominiums are an emerging trend for Chicago neighborhoods that seems likely to stay.

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