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CHICAGO — A real estate report released Wednesday by Mid-America Real Estate's Urban Team found that much of Chicago lacks the type of product that today's downsized big-box retailers are looking for.
"Retailers' footprints are shrinking," said Mid-America principal Dan Tausk, author of the report. "From Walmart to Best Buy to Office Depot, we continue to see a national trend toward shrinking square footage, which is expanding the vernacular from 'super' or 'mega' stores to include 'market,' 'express' and 'neighborhood' stores. If that trend continues — and I expect it to — then we've got a real lack of product to offer them in most of urban Chicago."
The "Urban Chicago Mid-Box Retail Study" examined existing and vacant space for stores between 15,000 sq. ft. and 50,000 sq. ft., excluding proposed new development that hadn't been delivered. It uncovered nearly 11.2 million sq. ft. of existing supply in the mid-box category, or 389 total spaces. It also discovered a vacancy rate in this size category at 7%, with strong absorption of existing vacancy.
"There's demand for mid-box growth in urban Chicago, despite a tough economy," Tausk said, adding that there are a few considerations retailers will be forced to evaluate in the process. They are:
Retailers with expansion/rollouts for Chicago will need to continue to think creatively, finding opportunities in multilevels, mezzanines or even smaller stores to meet future demand;
Retailers can expect rents to remain high in the mid-size sector due to obvious lack of supply and low vacancy;
Future opportunity in this mid-box size category may best come from downsizing/sublease space or the splitting of outdated larger footprints and future bankruptcies of other retailers; and
Absorption in this size range is strong and happens quickly with greater than a 500,000 sq. ft. of leasing currently proposed in existing space.