The Malls of Downtown Chicago, Illinois
We thought we’d switch it up a bit with the mall postings and fire off a whole bunch of them at once, in an urban setting: downtown Chicago.
The following six malls are the largest and most cohesive retail centers in downtown Chicago, which we’re defining as extending beyond the Loop and including the neighborhoods of River North and Streeterville because, well, they’re downtown for all practical purposes.
There are other enclosed retail sMalls – clusters of enclosed shops - in downtown Chicago, and they’re too numerous to note, such as the shops inside and along the Chicago Pedway, an underground system of walkways connecting many downtown buildings, and sMalls also exist in the atriums of downtown office buildings. We typically set a threshhold of at least 100,000 square-feet for these to “count” – occasionally something pops out that is smaller than this – and it’s not a set-in-stone rule (I know at least somebody is going to comment or e-mail me and say something like, “You didn’t include Xxxx, it’s a mall!). So, with that in mind we’ll proceed into the depths of the urban jungle.
Atrium Mall – This is the smallest mall we’re choosing to include, and the only one technically in the Loop - at least for now. The Atrium Mall consists of the first three levels of the James R. Thompson Center, a government building housing the offices of the State of Illinois. It was built in 1985, and the 17-story building looks more like a Postmodernist museum rather than an office building housing government facilities. The building was named for former governor Jim Thompson in 1993, after being called State of Illinois Center until then. No clue why that creative name would ever get scrapped.
The enclosed space inside the James Thompson Center is really an impressive sight to behold. An atrium exposes all 17 stories up to the top of the all-glass center, and it is said to be one of the largest enclosed spaces in the world. The building takes up an entire city block, at 100 W. Randolph, and the basement connects to the lesser-known Chicago Pedway, an underground system of walkways connecting many downtown buildings, and the CTA Subway/El system.
The Atrium Mall consists of 40 stores, restaurants, and services, catering mostly to the downtown working crowd, with about 140,000 square-feet of leasable space. There are no retail anchors to speak of, and the entire thing is closed after 6 on weekdays and all weekend, too, so the connection to the office crowd is the only reason this thing exists. The food choices are the largest component, and feature nothing too exciting, unless you consider the fact that there are two Dunkin Donuts exciting. And we admit, we kind of do.
We also find it amusing that the tiny Atrium Mall has its own Myspace page – erm, excuse me, her own Myspace page. She notes on it that she doesn’t watch too much TV, and doesn’t care for politics, but she does read one of our favorite authors - Paco Underhill. And why should she not? She’s a mall, after all…
Shops at the Mart – The Merchandise Mart, constructed by Marshall Field and Company in 1930, occupies two entire city blocks in the River North neighborhood of downtown Chicago, bounded by Wells Street on the east, Kinzie on the north, Orleans and Franklin on the west, and the Chicago River on the south. With 4.2 million square feet of retail space on 25 stories, the Merchandise Mart is one of the largest commercial buildings in the world, and one of the most fascinating buildings in Chicago’s impressive store of architecture.
Oh, and the first two levels are a mall.
The Merchandise Mart building itself is an homage to trading partners of Chicago’s past, present, and the site’s history as a Native American trading post - 56 terra cotta Indian chiefs circled the tower’s crown; however, they were barely visible from street level and intended to be viewed from nearby skyscrapers in River North, most of which were never constructed. Thus, the Indian chiefs were removed in 1961 as part of a larger renovation project at the Mart. Other architectural features included department store windows sans department store - the Mart was, after all, a vision of department store magnate Marshall Field – and an elaborate interior featuring eight marble piers, storefronts embossed in bronze trim, and green and orange terazzo floors.
As if all this wasn’t enough, the artwork inside the Mart essentially serves as a museum of retail. Famed Chicago artist Jules Guerin’s frieze of murals are the focal feature of the Mart’s lobby, and depict commerce throughout the world, focusing on the countries of origin for items sold in the building. In addition, along the Chicago River facing the Mart are eight bronze busts of retail magnates such as John Wanamaker, Marshall Field, Edward Filene, and Aaron Montgomery Ward.
But what businesses actually operate at the Mart?
Over the past 80 years the Mart has been home to radio stations, television station WMAQ, corporate offices, an el platform, and even a post office. Most of the space at the Mart, however, has been historically devoted to wholesale showrooms – mainly for interior design. Today, entire usable rooms are set up as showrooms, mostly for wholesalers and not open to the general public. In addition, the Mart is home to the world’s largest design expo and trade show, and also hosts Art Chicago’s international art fair. Also, the corporate offices of the Chicago Sun-Times relocated here in 2004when their old building was torn down for Trump Tower, and the corporate offices of Potbelly Sandwich Works - a fast-casual national chain – are located here as well.
In addition to the above tenants, the Mart became home to a two-level shopping mall in 1991. Called Shops at the Mart, the shopping mall gave the Mart a wider visibility to the public, featuring a variety of shops and services. It was to be anchored by Chicago-based department store Carson Pirie Scott (did this ever open? If so, how long was it open?), and had a lot of apparel shops and traditional mall stores when it first debuted. The Limited opened a 23,000 square-foot space and divided it among its subsidiaries. Over the years, however, most of the traditional chain fodder found in suburban malls found its way out, and the mall began to focus on the downtown office crowd. The eclectic mix of stores today also suggests this. Most of the apparel stores, including The Limited, no longer operate at The Mart.
The mall exists on the first two levels of the behemoth 25-story Mart, and although the mall doesn’t feature anything you’d go out of your way for as a visitor, the various food stalls, the food court, and the services here serve the downtown office crowd well.
The Shops at North Bridge – Opened in 2000, this is not only the newest mall in downtown Chicago, but also the newest enclosed mall in the entire Chicagoland area. Located in the 500 block of North Michigan Avenue, The Shops at North Bridge is anchored by the midwest Nordstrom flagship – which is actually a block west, past Rush Street - and features a five-level enclosed concourse of upscale shops, connecting Nordstrom to Michigan Avenue at street level.
The site where North Bridge currently stands was, for over 70 years, the McGraw Hill Building - an art deco style construction, which opened in 1928. In 1997, the City of Chicago got wind of the impending redevelopment of this historic, iconic building, and quicky declared it a designated historical landmark so they couldn’t totally decimate it. So, when redevelopment time came, the developers had no choice but to incorporate large portions of the building into their new design. After the McGraw Hill Building’s insides were torn down, its front facade facing Michigan Avenue was saved and grafted onto the new retail mall.
The design and layout here are interesting, mostly out of the necessity of space restrictions in an urban downtown, but also due to Chicago’s history. Because of the great Chicago fire of 1871, much of downtown Chicago – including the “street level” of Michigan Avenue outside of the mall – was rebuilt one or more levels above the actual ground. However, some of the side streets to the west of the mall are actually located at actual ground level, a level beneath Michigan Avenue. These include Grand Avenue, which becomes an underpass under Michigan Avenue, and Rush Street where Nordstrom sits.
The mall itself is a four-level structure which curves between the Michigan Avenue entrance, which is actually on a bridge over Grand Avenue, and the entrance to Nordstrom, which is actually located on a bridge over Rush Street. The entrance on Michigan Avenue is, like Water Tower Place, an elaborate lobby. Guests must go up at least one level on an escalator to reach “Level 1″ of the mall, and they may ascend via escalator to the other levels from there as well. The lobby also contains huge artistic sculptures, and windows on all sides featuring breathtaking urban views. Confused yet? Just visualize a mall, on a bridge, because that’s pretty much what it is.
The Shops at North Bridge’s tenants are mostly mid-range to upscale, including Kenneth Cole, Armani Exchange, and Louis Vuitton, and there’s a food court on the 4th level featuring nonstandard food court fare. Don’t expect McDonald’s and Sbarro here; instead, the offerings are mostly local and cater to upscale fast-casual dining.
The mall is also part of the larger North Bridge complex, which spans several blocks, from Michigan all the way over to State Street, and from Ohio down to Illinois. Other businesses in the complex have street frontage and aren’t connected to the mall structure, and include restaurants like Weber Grill, PF Chang, and California Pizza Kitchen, as well as furniture store Room and Board, who presumably moved here from the failed Chicago Place mall up the street (see below). There are also a few hotels in the complex: Conrad Hilton, Homewood Suites, Hilton Garden Inn, and the Chicago Marriott Downtown Magnificent Mile. Say that one without running out of breath.
North Bridge has changed ownership a couple times since opening in 2000. In 2003, Westfield America gained an interest from original developer John Buck, and rebranded the mall Westfield Shoppingtown North Bridge, dropping the “Shoppingtown” moniker in 2005. Then, in 2008, Macerich acquired the mall from Westfield, and Macerich put back the original name to The Shops at North Bridge. North Bridge is Macerich’s first property in the Chicago area.
North Bridge has been successful because of its sheer, stunning beauty, design, and the popularity of anchor Nordstrom. Putting Nordstrom at the back, a block away, and funneling shoppers from Michigan Avenue to it has proved to be a good idea.
Chicago Place – A few blocks north of The Shops at North Bridge along Michigan Avenue brings us to the next stop on our downtown Chicago mall tour, Chicago Place. In contrast with the nuanced success of North Bridge, Chicago Place is a mostly-failed dead mall, sitting right in the middle of downtown Chicago on its most famous shopping street. What gives?
Most of the center is currently closed, save for the food court and one store (as of 2009), and plans are underway to transform most of the mall into office space – save for the Mag Mile frontage along Michigan Avenue, which will remain retail.
Chicago Place opened in 1990 as a 600-foot, 49-story behemoth, located at 700 N. Michigan Avenue, between Huron and Superior Streets. The bottom 8 floors of the tower consisted, until 2009, of a vertical mall, anchored by Saks Fifth Avenue, which also opened as part of this development (it moved from across the street). The rest of the floors are condos.
Shortly after debuting in 1990, Chicago Place – while experiencing a modicum of success and lease rates around 70 percent during the 1990s – fell dramatically short of expectations. After all, it was on Michigan Avenue – one of the toniest shopping streets in the entire country. Some stores, mainly on upper floors, never filled or had trouble filling, and the whole center certainly never felt as cohesive as Water Tower Place, just a few blocks north.
Despite being located on one of the nation’s premier shopping avenues, Chicago Place met its end through competition and poor design. The awkwardly small, jagged floors of the vertical mall allowed for awkward placement of the handful of stores on each level, and the escalators, hemmed into the tightest space imaginable, gave people vertigo. Also, the zig zag design had the unanticipated – and certainly unwanted – effect of alienating shoppers from the storefronts, pushing them away and past them. In addition, anchor Saks is hemmed in at the back corner of the center, and casts a cold, unwelcoming pall upon it; it’s not an obvious focal point of the mall, drawing shoppers through the mall and into it like the 900 North Michigan or North Bridge malls do.
An express elevator near the rear of the mall, next to the Rush Street entrance, whisks people to and from the food court – the only truly inviting space in the mall – allowing them to pass the 7 stories between it and the ground level. Ostensibly, this was done to allow the food court to thrive on lunch patrons who didn’t have time to ascend each level or use the slower elevators in the middle of the mall’s atrium. It was a good idea, because the food court did indeed thrive, and is, rather oddly - as of late Summer 2009 – the only part of the mall still open for business. The food court is also, unlike the rest of the mall, a nice, refreshing open space full of huge windows with sweeping views of Michigan Avenue, downtown, and the lakefront to the north.
By the 2000s, Chicago Place’s days became clearly numbered. In 2004, a group of New York investors bought the mall for the price of $39 million – a steal. Or so they thought. Longtime tenants Ann Taylor and Room and Board had recently closed, as well as the tenants who brought life to the ground levels - Bockwinkel’s, an upscale grocer, a gourmet coffee place, and a flower shop.
It became painfully clear toward the middle of the 2000s that Chicago Place could simply not keep up. It had neither the cachet of tourist-popular Water Tower Place, the upscale luxury of 900 N. Michigan Shops, nor the nuanced open floorplan of North Bridge. In January of 2009, the Talbots store finally closed, leaving only a Tall Girl shop on the third floor, and the food court as the only remaining tenants. According to Tall Girl’s website, the store is still open as of September 19, 2009 – is this true? Probably not for long.
Long term plans are for the upper floors of Chicago Place to be gutted, but we’re not sure if this includes the food court or not. The food court, while still technically open, is now having vacancy issues of its own – McDonald’s couldn’t even survive here – and the hike up to he 8th floor is probably a bit of a time-waster for people in a lunch crunch. The street-level facade will be converted into a Zara store, and Saks will remain as well. A Best Buy was to come in as well, but that apparently fell through as Best Buy recently opened up in the John Hancock Center four blocks north.
So long, Chicago Place. You were a neat idea, if poorly executed.
Water Tower Place – Three blocks north of Chicago Place, and across the street, lies Water Tower Place – a Chicago shopping institution since 1975. The 8-level, 750,000 square-foot mall lies at the base of an 859-foot, 74-story skyscraper housing a Ritz Carlton Hotel, condominiums, and one of Chicago’s most famous residents – Oprah Winfrey; however, rumors are constantly afoot that she may be leaving – or maybe not. Keep us on our toes, O.
Brushes with fame aside, Water Tower Place single-handedly changed retail patterns in Chicago after it opened in the 1970s, bringing accessibility as well as shifting Chicago’s retail center of gravity. Water Tower’s 100 stores weren’t – and still aren’t today – the exclusive, upscale boutiques seen on Michigan Avenue and nearby Oak Street. Instead, the stores at Water Tower Place are those found in successful, A-Tier suburban malls, such as Hollister, American Eagle, Chico’s, and Ann Taylor.
The major anchor at Water Tower is Macy’s, which was, until 2006, a Marshall Field’s (wistful shout out to MF) – and a Lord and Taylor anchored the other side of the mall until it closed in 2007. The L&T space is currently a huuuuge American Girl Place, in part, and the rest of it is being redeveloped for other retail uses. Also, in addition to stores, there’s a Drury Lane Theater for live performances, and although there is no traditional food court, there are fast food and sit down dining establishments scattered throughout the levels, including California Pizza Kitchen, Wow Bao, and Foodlife – a food court-esque area on the mezzanine (first level above the lobby).
The design specs and layout of Water Tower Place also make it a unique place, unlike the awkwardly positioned space at failed Chicago Place, another vertical mall a few blocks south. From the Michigan Avenue main entrance lobby, guests are presented with escalators ascending upward featuring multiple tiers and a waterfall running beside them. The lobby itself only features entrances to American Girl, Macy’s, and Wow Bao – a counter service pa-Asian restaurant. Upon reaching the mezzanine level, guests are greeted with the Foodlife food court area, featuring multiple genres of cuisine in counter-service format, and a small market featuring fresh produce and other items. From the mezzanine level, the 8-level mall begins, and one can choose to ascend floor-by-floor using the escalators along one side of the atrium, or the elevators in the middle. The entire place is decked out in marble and shiny metal, and combined with the small space on each level, gives shoppers a frenetic urban vibe – that’s why they came to shop in downtown Chicago, I guess.
This accessible mix of stores brought other popular chains to Michigan Avenue, and helped Michigan Avenue replace State Street as Chicago’s all-purpose one-stop retail destination. The upscale shops and boutiques still exist, and even have their own niche over on Oak Street and in the 900 N. Michigan mall, but they have become the exception rather than the rule, and Water Tower Place was the impetus for this change.
By the way, the name Water Tower Place comes from the famous water tower located across the street, one of the only structures in Chicago to survive the great fire of 1871.
900 North Michigan Shops – In 1988, Urban Retail Properties, a Chicago-based developer, saw Water Tower Place’s immense success transforming the retail geography of Chicago and wanted a piece of the pie. They apparently recogized they couldn’t compete head-to-head with Water Tower, but they realized that Water Tower squeezed out the previous monopoly upscale retailers had prior to its existence, so they developed a plan. After signing Bloomingdale’s and junior anchor Henri Bendel (now clothing-box Mark Shale), they embarked on a massive, mixed-use development plan, featuring 7 levels of upscale retail in a vertical mall – much like Water Tower Place – along with condos and a Four Seasons Hotel.
Much like neighboring vertical malls Chicago Place and Water Tower Place, the building the mall is in is also a megatall skyscraper. At 871 feet tall, 900 North Michigan has 66 stories and is – as of September 11, 2001 - the tallest building in the U.S. housing a shopping mall.
The design and layout of 900 North Michigan Shops is similar to that of its sister, Water Tower Place. T
he 450,000 square-foot vertical mall is about half the size of Water Tower Place, and is accented with a mostly white facade on the inside. The angles aren’t intrusive either, unlike Chicago Place, with its failed zig zag design. 900 North Michigan encourages shoppers to actually shop in the stores. Anchor Bloomingdales is at the back (Rush Street side) of the center, and the anchor is a visible focal point upon entering from the Michigan Avenue main entrance. In addition, the arrangement of the escalators in a parallel pattern funnels shoppers past the shops, and not into a confusing spiral of vertigo.
As noted above, the clientele 900 Norh Michigan wants is more indicative of Michigan Avenue’s historical place in Chicago’s retail history as an upscale shopping destination, rather than the current mish-mash of all different types of retailers represented in Water Tower Place and the environs. Also, 900 North Michigan is also closer to the upscale boutique district along Oak and Walton Streets. By capturing an upmarket niche and through an inviting design, they have been successful where Chicago Place failed. Only about half of the mall’s roster of stores are national, recognizable chains, like Gucci; the other half are smaller-scale exclusive upmarket boutiques.
We walked around downtown Chicago and visited all of these landmarks during an afternoon in Fall 2007. As usual, feel free to leave comments.
Jonah Norason (Pseudo3D)
September 22nd, 2009 at 4:02 pm
Oooh, very nice. But does this mean these malls won’t get their own article? Never mind, it’s really cool. Is WTP the first mall that combined condos and mall? (it seemed to work!)
[Reply]
TenPoundHammer
September 22nd, 2009 at 4:44 pm
Within downtown Chicago, there were also Century Mall and River East Plaza. I don’t know much about either; did they ever have anchor stores?
[Reply]
Prange Way Reply:
September 22nd, 2009 at 5:09 pm
@TenPoundHammer, As far as I can tell, River East Plaza only has two commercial tenants – a Latin restaurant and an upscale grocer. http://www.parkviewwestcondos.com/ViewCommercial.aspx?com=3
And, I’ve never heard of a Century Mall downtown. There’s a Century Mall (vertical mall) that I guess I would count at 2828 N. Clark St., in Lincoln Park. If it’s still there, that is. I haven’t been there in a few years, and its retail tenants were dwindling.
[Reply]
TenPoundHammer
September 22nd, 2009 at 6:36 pm
I’m told that River East used to have more than that. Also, I guess Century isn’t really downtown then.
[Reply]
Steven Swain
September 22nd, 2009 at 9:03 pm
This has to be one of my favorite Labelscar posts ever! Chicago has some of the coolest urban retail in the world, and the plethora of vertical malls is part of the reason. I have been to all of these except North Bridge (and that’s because I haven’t been to Chicago since the late 1990s).
Of all of the malls mentioned, my favorite is Water Tower Place. It is very much a product of its era, but it’s one of the best examples of 1970s-style retail out there. Remarkably well preserved as well.
[Reply]
Rich
September 22nd, 2009 at 9:53 pm
Carson’s had a small branch in the Merchandise Mart in the 80s, which had been a round for quite awhile. I don’t know if they moved into the new mall. That was a round the time of one of their mergers. Carson’s had, at that time or just before concluded several unsuccessful experiments to boost downtown retail. These included a floor with women’s career wear in the basement of the State Street store that opened early in the am before the rest of the store and the Aracadia (maybe Acadia) store within a store with cards, novelties, and a cafe.
[Reply]
Kurt
September 22nd, 2009 at 11:44 pm
Great post!
Living in the Chicago area in the 90’s I do remember that Carson’s opened a store at the Shops at the Mart in 1991. It was heavily advertised, but didn’t offer much retail-wise different than the suburban malls. That Carson’s also was small, I believe it only offered women’s clothing and accessories- no mens and no home departments. I believe it closed by 1995.
Also, Water Tower place used to be more of a unique, upscale mall in the 80’s until 900 North opened. After that, the retailers became more common but upscale mall stores- while 900 North too its role.
Also Lord and Taylor closed there not because of bad business, but because the mall’s owner, GGP was able to get higher rents from smaller tenants than from a department store.
[Reply]
SEAN
September 23rd, 2009 at 9:07 am
The mart is also home to the offices of the CTA.
At one time a Loews twin theatre was located at 900 North Michigan. From what I remember a health club took that space.
I think River East Center includes the AMC 21 Theatre.
[Reply]
SEAN
September 23rd, 2009 at 9:29 am
From Retail Traffic
Retailers Look to Fill Vacancies in Chicago’s Loop and Affluent Shopping Districts
Sep 22, 2009 3:41 PM, By Jennifer Popovec
It’s time to move back to the city. That’s the conclusion that many national and local retailers seem to be drawing about Chicago. There, firms have responded to the downturn by reining in expansion plans in the suburbs in favor of pursuing urban locations that have opened up in Chicago’s Loop and North Side neighborhoods.
The interest from retailers can be summed up in two words: density and dollars. Despite the difficult economic conditions, the Loop and North Side neighborhoods continue to attract residents, employees and tourists, all of whom generate a steady flow of foot traffic, says Gary DeClark, managing director of Integra Realty Resources-Chicago. Throw in the roughly $81,000 in disposable income per household floating around Chicago’s urban core and you get a combination that’s tough to beat.
Apple, for example, recently inked a 10-year ground lease to build a 15,000-square-foot standalone location in the Clybourn Corridor, a patch of retail that caters to affluent residents of the Lincoln Park and Gold Coast neighborhoods. The company, in part, took advantage of the kinds of vacancies cropping up when retailers including Z Gallerie and Pottery Barn shut stores. As a result, retail sites command around $60 per square foot—similar to what retail spaces fetch in the Loop and down between 8 percent and 10 percent from the market’s peak, notes Greg Kirsch, principal of Newmark Knight Frank’s Chicago retail group.
Whole Foods also has stepped into the breach and chose Clybourn Corridor as the site for the third largest store in the company’s portfolio—a 75,000-square-foot behemoth on Kingsbury. Even retailers that traditionally prefer lower-income, suburban sites have been tempted. Discounter Aldi Inc., for example, leased a 16,000-square-foot space vacated by Bombay Furniture.
The trend is replicated around the city. Other retailers planning to open within Chicago’s city limits include West Elm and luxury brands such as Swarovski and Baccarat. Restaurant chains are in the mix as well including Wich Wich, a sandwich concept new to the Chicago market, and Qdoba Mexican Grill, which has leased three Loop locations. Even big box retailers such as Target and Kohl’s are rumored to be scouting for sites. So far, Target has committed to an 180,000-square-foot, two-level store at Wilson Yards Shopping Center on the city’s north side.
Outperforming the suburbs
Vacancies across the Chicagoland market have increased this year, growing to 11.6 percent at the end of the second quarter from 11 percent during the first quarter, according to CB Richard Ellis. Net asking lease rates dropped even further to $15.95 per square foot from $16.40 per square foot in the first quarter 2009. The picture is brighter, however, within city limits. The City North submarket, which CBRE defines as the Loop and Chicago’s inner neighborhoods, posted the lowest vacancy rate in the region at 6.3 percent. It also had the highest rents, ranging from $22.74 per square foot to $27.21 per square foot.
Still, that’s not to say that Chicago hasn’t faced its share of adversity, even if it is outperforming its suburbs. Consider Armitage Avenue, a tony strip of trendy boutiques and upscale restaurants on Chicago’s North side. Just 12 months ago, there were few vacancies. Today there are at least seven vacant spaces, according to Shannon Hormanski, an associate director of Chicagoland Retail Services for Cushman & Wakefield of Illinois Inc.
Yet by and large, retailers have taken advantage of the current conditions to vacate suburban locations and relocate within the city in “areas that they have been not been able to get into before,” says Stan Bobowski, president of Bobowski & Associates Inc., Chicago-based retail brokerage firm. Other retailers that already had a presence in Chicago are also upgrading their locations.
As a result, retail leasing activity in the Loop and near North neighborhoods, while not frenetic, continues to be lively, according to John Vance, vice president of the Chicago-based brokerage firm. Even so-so locations within the city are generating interest, especially if owners have dropped their rental rates to make it more affordable for retailers to operate.
The Magnificent Mile—a stretch of Michigan Avenue north of the Chicago River—remains Chicago’s premier retail district. It too has been dinged and affected by vacancies. But other retailers are taking advantage of newly discounted rents to score coveted slots. With all the shuffling, experts estimate the Michigan Avenue’s vacancy rate is approaching 10 percent, offering an opportunity for expanding retailers to grab prime space at discounted rates. Rents on the Magnificent Mile traditionally exceed $300 per square foot, but have dropped as much as 20 percent over the past 12 months, according to local players.
Borders Books & Music, for example, will close its 55,000-square foot store (the largest in the chain) in 2010. Bankrupt retailer CompUSA also closed it store nearby. Meanwhile, additions to the strip include Best Buy, which opened a 22,000-square-foot store in the John Hancock Building. And a former Bennigan’s space at 225 N. Michigan has been leased to Sweet Water Tavern & Grille.
The wildly popular American Girl Place also recently located, moving from a 40,000-square-foot location at 111 E. Chicago Ave to a 52,000-square-foot spot at Water Tower Place. Australia-based surfwear retailer Billabong joined American Girl with a 3,700-square-foot store at Water Tower and in the process made its Midwest debut. And Spanish apparel chain Zara, which has focused its Chicago expansion plans on urban sites, plans to open a 33,000-square-foot store at Chicago Place.
Star of the city
Some parts of the city are hanging in. But there is one area where rental rates are increasing. The area south of the river along Michigan Avenue between Wacker Drive and Washington Street just steps from Millennium Park has seen its rental rates double in the past several months with some deals having been inked for $100 per square foot or greater.
“Millennium Park is a huge traffic driver, pulling people south along Michigan Avenue,” Kirsch says. The area no longer attracts only a business-related lunch crowd, but a mix of local shoppers, business people and tourists.
Along with a number of residential projects such as Lakeshore East, new tenants include a local art gallery called Arts and Artisans, Noodles & Co.’s first urban restaurant, and Clearwire Corp.’s first Chicago store. The high-speed wireless Internet provider, which signed a long-term lease for 2,700 square feet at 180 N. Michigan Ave., has chosen mall locations for most of its stores in other markets, according to Kirsch, who represents the Kirkland, Wash.-based company. However, the foot traffic generated near Millennium Park compelled the company to open its doors on Michigan Avenue.
Ongoing development
While development has slowed considerably in suburban Chicago, developers continue to move forward with 1.1 million square feet of new retail space in the City North submarket, according to CBRE. Joseph Freed & Associates, for example, is nearing completion on its Block 37 project, located at 108 N. State Street.
The mixed-use project, which features 280,000 square feet of retail space, is scheduled to open in November. Freed has inked leases with a number of retailers that prefer urban locales, Vance notes. Puma, for example, will debut a new format that will be the first U.S. store to carry its entire line of apparel, shoes and accessories. There, it will be joined by anthropologie, Zara, Aveda Salon & Spa, Rosa Mexicano restaurant, Bigsby & Kruthers and Swarovski.
Similarly, local developer Structured Development LLC continues to move forward with New City, a 1 million-square-foot project in the Clybourn Corridor that will include 400,000 square feet of street-front retail, a 196-unit luxury apartment tower and parking for 1,050 cars. The firm has already inked a lease with Milwaukee-based Roundy’s Inc. to anchor the project with an 80,000-square-foot European-style grocery store.
Jeff Berta, senior director of real estate development with Structured Development, says he is negotiating with two other retail anchors—one that is new to Chicago and one that is expanding within the city. With city approvals expected before the end of 2009, the firm plans to break ground on the project in mid-2010.
In the meantime, Structured Development continues to lease its recently completed project, Blackhawk on Halsted, a 225,000-square-foot mixed-use development. The retail portion of the project is anchored by outdoor retailer REI, which occupies 32,000 square feet.
Berta says the project has experienced a decline in leasing activity for its retail space, leaving about 49,000 square feet of retail space available. As a result, Structured Development has become a “bit more aggressive” with its rental rates to fill the remaining space.
“Ultimately, I believe the urban market is still strong in Chicago,” Berta says. “Even though retailers are focusing on fewer locations, there are still deals to be done in the city.”
Olympic Opportunity
Along with Rio de Janeiro, Tokyo, and Madrid, Chicago wants to host the 2016 Summer Olympics. The Windy City continues to refine its plan to host the Games, which would place the city on the world stage and welcome more than 200 nations.
The City of Chicago has hosted a number of festivals, celebrations, and events including two world’s fairs and the 1959 Pan Am Games. It also hosted the Democratic National Convention in 1968 and 1996.
Although Chicago 2016’s plan for the Games places the majority of the competition venues in the city’s parks, it also includes an Olympic Village that would cost about $1 billion to be built on the site of the old Michael Reese Hospital. The proposed site of the Village will become a mixed-income housing and retail community, with up to 30 percent affordable housing and will be developed regardless of whether Chicago hosts the Games, according to the Host City Committee.
According to a report commissioned by the Committee, the Olympic and Paralympic Games will generate $22.5 billion in economic development for Illinois over an 11-year period and create the equivalent of 315,000 full-time jobs for one year. More than half would be in Chicago and generate $7 billion in wages.
Chicago’s retail sector would likely benefit from the Games, expert say, but no one is sure to what degree.
Retailers that already have stores in the city will probably experience their best sales years, and the restaurant community will hit a “bonanza”, says Stan Bobowski, president of Bobowski & Associates Inc., Chicago-based retail brokerage firm.
However, Bobowski doubts the Olympics will compel many retailers to open stores in Chicago if they’ve never considered it before. “I just can’t see a lot of retailers signing multi-year leases just to take advantage of an event that lasts a few weeks,” he explains.
Shannon Hormanski, an associate director of Chicagoland Retail Services for Cushman & Wakefield of Illinois Inc., agrees: “I don’t think we’re going to have a huge surge in retail leasing or development just because of the Olympics—I don’t think there are Olympics chasers. But, the Olympics will push retailers that have been hemming and hawing about whether to open shop in Chicago to pull the trigger.”
“
[Reply]
Doug
September 23rd, 2009 at 11:52 pm
I worked on Michigan Av. until this past January (and lived in Chicago till August), and am familiar with most of these places. Chicago Place has no stores-I recall seeing the Tall Girl signs, but the storefront looked empty. That whole space is badly executed, but it’s quite fascinating to ride down the normal elevator, just going through floor after floor of dark storefronts. (I should amend that-there is a Chicago souvenir shop and a watch shop in the food court, or there was last winter).
The Mart is basically restaurants and a few shops-there’s a B. Dalton-type of bookshop/magazine stand, and a couple of utility type of places. Unless you count things like the Kohler showroom as a store. It’s an attractive space, though-I used to ride the Brown Line down from the north side and stop at the Mart because I could run in and get a drink. It’s a good thing I don’t work there-the food court is awesome, I’d gain a ton of weight!
[Reply]
BIGMallRat
September 24th, 2009 at 5:08 pm
I agree with the others. This was a great post! I enjoyed all the malls being on one page. Especially an article about the great City of Chicago. Urban malls are often overlooked… or uninteresting from a suburban standpoint. Glad to see them get the recognition they deserve. Chicago in 2016!
Scott
[Reply]
SEAN Reply:
September 24th, 2009 at 6:42 pm
@BIGMallRat, Your so right Scott, I couldn’t say it better. The best part is that most of them can be reached on foot or in the worst case by using public transit. Better yet get a Chicago Card & hit as many of the areas malls as possible just for the heck of it.
[Reply]
Steve
September 24th, 2009 at 11:58 pm
Excellent post guys. I haven’t been back to Chicago since I left in 98 except for a quick visit in 06 and these malls brought back tons of memories. Chicago is where I was born and lived for 29 years and it will always have a special place in my heart.
[Reply]
Jonah Norason (Pseudo3D)
September 25th, 2009 at 6:33 pm
Wow, great job on this pack of posts. Before Coddingtown and this, Massachusetts and New York had the most malls on Labelscar, followed by New Jersey and Texas (tying), then California. Now Illinois has clenched a solid second place (well, technically third, since New York and Massachusetts are tied for first). It’s a three-way tie for New Jersey, Texas, and California, which is weird, because as of late (basically this year and last), California and Texas have gotten out of the less-than-half-a-dozen slums and are solid contenders, but NJ, which was making good progress, dropped out of the race, basically.
Me? I’m rooting for Texas.
[Reply]
Caldor Reply:
September 25th, 2009 at 6:56 pm
@Jonah Norason (Pseudo3D), of course you realize some of this was because I moved from Boston to San Francisco
We both have lots of content from all over the country, and somewhat intentionally stagger it geographically to keep from dwelling on one place.
[Reply]
Jonah Norason (Pseudo3D) Reply:
September 25th, 2009 at 7:18 pm
@Caldor, I know. But as far as I know, Prange still lives in the Wisconsin area, and there hasn’t been much new content from that recently (except, of course, this post). If you ever go down to Houston, there’s a number of malls you can get a good circuit by going north on I-45, then west SH-30, then north SH-6, west US-190, and north I-35 to Dallas. This puts a cool number of malls within reach (from south to north: Greenspoint Mall, The Woodlands Mall, West Hills Mall, Post Oak Mall, Temple Mall, Richland Mall). Or stay in Houston and check out the local specimens.
[Reply]
Jonah Norason (Pseudo3D) Reply:
September 27th, 2009 at 12:17 pm
Also the “bulk post” has inspired me to make a Memorial City Mall/Town & Country Mall post. The problem is my MCM pictures are insufficient (they only have an exterior, the Target wing, and the food court) and I have no T&C Mall pictures (or even the nifty outdoor development that replaced it).
Actually, I need to take a trip down to Houston with my driver’s license from College Station and hit up a few malls.
[Reply]
James
September 25th, 2009 at 10:56 pm
I was wondering when Labelscar would get around to the urban malls in Chicago. I’ve worked in downtown Chicago for 11 years. My office is actually in the 900 North Michigan Avenue building which houses Chicago’s priciest vertical mall shops- Gucci, Michael Kors, Mont Blanc, Monaco, Mark Shale, Williams Sonoma, etc.- anchored by the Bloomingdale’s store. Also in 900 North Michigan are floors of offices, floors of condominiums and the Four Seasons Hotel.
Even in the best of times, the 900 North Michigan mall always seemed, to me, to be unusually devoid of shoppers. Clearly, the stores in 900 North Michigan haven’t depended on volume for survival- just very pricey goods.
Admittedly, I don’t hang around 900 North Michigan on the weekends [commuting to the City each weekday leaves me with little desire to go to the City on weekends]- so, perhaps the weekend crowds are more impressive.
With the current recession, 900 North Michigan has become even quieter. Lots of empty stores. The mall management even has a woman whose primary job is to dress-up the vacant store windows so that they do not seem so- well, vacant. Her efforts are working- 900 North Michigan hands down has the nicest vacant storefronts in the City.
There is also a lot of store movement within the 900 North Michigan mall. By “store movement”, I mean that many of the still open stores have relocated within the mall in order to get more strategic locations. By strategic locations, I mean street-front on Michigan or the lower floors within the mall.
The upper floors in the 900 North Michigan Mall are mighty cold and empty these days – the vacant store window decorator has been very busy in the upper levels.
Why the decline of the vertical malls? The loss of discretionary income as a result of this current recession, coupled with Cook County’s confiscatory sales tax [10.25%, the highest in the country] clearly are having an impact. Sales tax rates in the suburban counties around Chicago are much lower.
Still, I wonder if something else is contributing to the decline of the vertical malls. For example, the Chicago Place vertical mall a couple of blocks south from 900 North Michigan began its fast decline well before this current recession began [currently, it is basically empty]. Do people, even with fat pocketbooks and job security, really have the time and interest to wander around 8 floors of vertical mall? How much “consuming” can a body take? Sure, the newest of the vertical malls, North Bridge, seems to be holding its own, but it’s still relatively shiny and new. May be we are just over-retailed, period.
[Reply]
Doug
September 25th, 2009 at 11:42 pm
@James-I think vertical malls are are generally going to be less successful than more traditional mall layouts, or lifestyle centers, because they’re difficult to shop. There’s usually only two ways to get from floor to floor, and they’re usually crowded. Once you’ve seen the few stores on one level, you have to stand in line to move.
I did some of my Christmas shopping at Water Tower-I literally had to go to two stores-and the crowds were so awful that it took over an hour to fight my way up the escalators. Heck even midweek over the spring and summer it was awkward to traverse levels (I was doing a lot of job hunting this spring, so I was in all of the malls downtown regularly). I can see why many wouldn’t want to shop there, at least not often.
[Reply]
James Reply:
September 26th, 2009 at 6:08 pm
@Doug, I agree that vertical malls can be difficult to shop. The designers of the vertical malls would do well to design the malls so as to make movement within the malls easier.
You mention Water Tower Place. I find the escalators at Water Tower confusing. The food court is located on a mezzanine level which is sort of half-way between two shopping levels. If you get on the wrong escalator, you’ll miss it altogether. Granted, you can do some back-tracking to get to the mezzanine level, but should it be that difficult?
Chicago Place also had design issues. The food court, when the mall was a going concern, was on the 8th floor. The high floor made sense, since it took advantage of city views. But, only one elevator in the building would take shoppers directly from the first floor to the 8th floor. That one elevator would be overly crowded at the noon hour.
The biggest design issue with the vertical malls, in my opinion, is that the stores on the upper floors require a bit of effort for shoppers to seek and find them. This is fine if you are a lady (or gentleman) of leisure, with time to wander the mall. But not so fine for the office worker on his or her lunch hour, or the harried mom toting along kids and grandma.
The biggest anchor in Chicago Place (but for Saks) was Room and Board Furniture. They were hidden away on three of the upper floors. Eventually, Room and Board got wise and moved to a street-front location around the corner on Ohio Street where it appears to be thriving.
[Reply]
Chip
September 26th, 2009 at 12:03 am
There is a Neiman-Marcus at 737 N Michigan, I don’t believe it is connected to any of the malls. With the new Best Buy, the Hancock Center seems to be turning its lower levels into a retail hub. The River North area was still filled with shoppers despite the bad economy and Chicago high tax rate
[Reply]
James
September 26th, 2009 at 9:43 am
The Magnificent Mile is still filed with shoppers. The Michigan Avenue sidewalks are crowded with folks, even with this recession. It is the most impressive shopping street in the Midwest.
So, the street is crowded. But are they crowds buying anything? Judging from the few who manage to make it beyond the street-front retail at 900 North Michigan, and the empty shell of Chicago Place, no. With the stock market crash of 08 and early 09, even the wealthy have been impacted by this recession. The stock market has picked-up greatly in the last few months, but few are feeling confident.
I will say it is nice to wander into Bloomingdale’s at 900 North and have the store help fawn over me. At last! A customer!
[Reply]
James
September 27th, 2009 at 8:26 am
More on vertical mall design, and more on 900 North Michigan:
While the Labelscar anchors are correct that 900 North Michigan is better designed in terms of no zig-zagging (Chicago Place) and no confusing mezzanine level (Water Tower Place), the planners of the retail space within 900 North Michigan made a significant error. As we all know, Christmas is the peak retail season. Retail sales at Christmas can make or break a mall. Appropriately, then, the Urban Retail people at 900 North Michigan put up a magnificent Christmas tree each Christmas season in the atrium area of the mall- many stories high, and beatifully adorned with large ornaments. The problem? This beautiful soaring tree cannot be seen from Michigan Avenue. One must enter the mall from Michigan, walk past the street-front stores, the coffee/sandwich stand and sets of escalators in order to get into the atrium area and actually see this tree. This tree could not be placed up front because of the mall’s design, with pedestrian bridges and shops on the Michigan Avenue side, rather than the atrium. Imagine if this soaring tree was up-front, lit-up and easily viewed from Michigan Avenue. It would lure the shoppers into the mall like a magnet. As it is, the casual shopper on the Michigan Avenue sidewalk, if unfamiliar with 900 North Michigan, has no idea that such a tree exists.
[Reply]
SEAN Reply:
September 27th, 2009 at 9:57 am
@James, I figure if you are a tourist visiting Chicago for the first time, you would naturally walk along Michigan Av as you would go to Times Square while in New York. Now if it is around christmas there’s a greater chance you will end up visiting all of the malls if for no better reason then just getting out of the cold.
In New York these types of malls were built just south of Macy’s & both of them ended up being reconfiggured. Harrald Center an anchorless 8-story mall is now a handful of big box clothing stores & Manhattan Mall another 9-story center formerly anchored by A & S, then Sterns & now J C Penny. Over time the mall shrank down to 4 levels & the rest of the building has become offices. Manhattan Mall was a rehab of the Gimble’s flagship store. the location sits above the PATH 33rd Street station & the Harrald Square subway station making access extremely easy.
[Reply]
BWChicago
September 27th, 2009 at 5:25 pm
-Chicago Place failed, in part, because it opened in a recession; it never was able to get the momentum. Part of the “bad design” you see there now is a lack of lighting for stores that aren’t there. It’s worthwhile to look at the finishes they used; you see lots of intricate stencil work, faux finishes, that sort of thing. Really expensive marble floors in the lobby. It was very carefully designed by Skidmore, Owings, and Merrill to recall Chicago’s architectural history. There’s more going on there design wise than you might notice, especially with the murals by the entrance and in the food court. Also notable is that the basement level of Chicago Place had a popular Bockwinkel’s grocery for a long time.
-River East’s history is worth researching. It’s all an arts center now with a couple of anchors, but its previous incarnation was North Pier, a “three-level, 200,000-square-foot retail mall containing a central rotunda, six atriums and glass-sided galleries overlooking Ogden Slip”. and a fascinating adaptive reuse by Booth/Hansen. It had high hopes pinned to it when it opened in 1988 for revitalizing the area, before Navy Pier was redone. It was essentially an entertainment mall on the Fanueil Hall festival marketplace model. Some of the stores were a candy store, a County Seat, a sports memorabilia store, fine art store, replica jewelry store, nautical gift store, a flag-themed store, Turin Bicycles, Cashmere, make your own videos, cowboy accessories, an outdoor ice rink, a CTA souvenir shop, a hologram gallery, a Children’s museum, mini-golf, a maritime museum, a virtual reality center, and a Schwinn museum. It was well-known for being about 40% restaurants and nightclubs, many of which overlooked the Ogden Slip on terraces, such as Baja Beach Club, Baja Live (dueling pianos), and Baja Grill, Dick’s Last Resort, Fresco’s Italian, The Boat Club, Old Carolina Crab House, and a food court. By 1997 Navy Pier was built, the parking prices skyrocketed, and the mall began being sectioned off for larger tenants; the rest of the River East project was delayed, so the mall closed up instead of converting to national retailers, got more upscale finishes, and became the River East Arts Center it is now.
[Reply]
James Reply:
October 19th, 2009 at 3:40 pm
@BWChicago, your point regarding the design of Chicago Place is well taken. Aesthetically, I do agree that the mall was attractive. SOW is no slacker, design-wise.
The real issue was the configuration of the mall, rather than the design aesthetics: food court all the way at the top, with only one express elevator, at rear of mall; big anchors like Room & Board buried in the upper floors. Also, Chicago Place has a very large revolving door which seems to intimidate a lot of tourists and other first time visitors to the mall, much to the amusement of passersby. One has to move with the door, rather than move the door. Of course the door is easily figured out, but should one’s first time visit to a mall be frustrated by having to figure out a revolving door?
If a vertical mall is to succeed, then it seems there must be something to lure the shoppers off the street and into the mall and its upper stories (in additon to easy ingress!). Chicago Place just didn’t have that something, not even the easy ingress…
[Reply]
SEAN
October 19th, 2009 at 11:50 am
Chicago Holds Up In Tough Market
Brokers, developers give a snapshot of activity in the area, while looking at nationwide trends.
Roundtable moderated by Jerrold France and Randall Shearin
Shopping Center Business recently held a Chicago Retail Roundtable, hosted by law firm Levenfeld Pearlstein LLC at its offices on LaSalle Street. Despite a lackluster year for retail, turnout at the roundtable was robust and the discussion was again lively, offering a snapshot of activity within the market, as well as a view of general industry trends. In attendance this year were: Adam Secher, Baum Realty Group; Peter Eisenberg, Clark Street Development; Peter Caruso, Intercontinental Real Estate & Development; Lew Kornberg, Jones Lang LaSalle; Marlon Stone, Katz & Associates; Richard Kahan, KB Real Estate; Marc Joseph, Brian Kozminski and Keith Ross, Levenfeld Pearlstein; John May, May Center Advisors; Terry McCollom, McCollom Realty, Ltd.; Ben Wineman, Mid-America Asset Management; Jim Schutter, Newmark Knight Frank; Robert Rowe, Sierra Realty Advisors; Marc Siegel, SJS Realty Services; Ryan Murphy; SRS Real Estate Partners; Tim Thanasouras, Thanasouras Commercial Properties; Aaron Gadiel and Jonathan Payne, The Jaffe Companies; James Turner, The PrivateBank; Sy Taxman, The Taxman Corporation; Richard Dube, Tri-Land Properties; Glen Todd, U.S. Cellular; and Camille Julmy, U.S. Equities.
SCB: How are retailers viewing the Chicago market as a whole?
Murphy: As retail brokers, are still busy. We have a pool of tenants that are active. The large box tenants — JC Penney, Lowe’s and the like — have slowed down. They are still looking but they are not as active as they were. Discount Tire, Famous Dave’s and Tilted Kilt are expanding. We are looking in multiple markets for them. Verizon is looking at some deals, as is Genghis Grill.
Stone: The economic reset has influenced site selection from the standpoint of asset class, gross occupancy and opportunity. There is no new development. Therefore, the older shopping center once bypassed has become relevant again. At the same time, our long overbuilt industry is now feeling the impact of fewer retail concepts to absorb a substantial inventory of space, and as a result, the supply-demand curve has shifted, and rents have compressed. Having a tenant who can take existing space is driving the business today. A retailer may very well secure a rare first tier location where high occupancy had prevented them in the past.
Lew Kornberg
Kornberg: Everyone is looking for things to turn to the positive. The discounters are in pretty good shape these days. Everyone else has hunkered down and is looking for more tangible signs of recovery before they are willing to emerge from the bunker and start doing deals aggressively again.
SCB: How is Chicago faring versus other national markets? Is it doing better or worse?
Kornberg: Historically, Chicago has fared better, and it continues to do so during these times. Chicago is healthier than most of the markets I’ve been to.
Stone: I’ve always described Chicago as the ‘anchor’ of the Midwest. We have an MSA approaching 10 million with significant growth projected. The economy remains diverse with employment generators that keep the city and suburban areas vibrant. The retailer understands the purchasing power of this marketplace and while store openings may be limited, temporarily, Chicago will always be on the radar for those companies seeking market share within the Midwestern United States.
SCB: You represent a lot of retailers, and you are national in scope. What is the feedback you are getting from your other offices regarding their markets?
Stone: In my estimation, until we see the condition of the American consumer improve, our industry will remain sluggish. The needs based retailers, such as Dollar General, are experiencing robust growth as customer’s trade down to save money. Generally speaking though, people are not spending and retail companies are reporting comp store decreases. It becomes increasingly difficult for a CFO to throw capital at store growth when the existing network of stores loses money.
SCB: Are the tenants looking more at urban areas?
Stone: There has been more focus on the urban trade areas throughout the country — and in Chicago — versus the greenfield, high growth suburban areas. Most of the greenfield areas were built and sold to retail companies on high growth. That growth has been curtailed. You don’t get a full bang for your buck in those areas. The areas that have sustained themselves over the years have density.
SCB: When you have a city like Chicago, are the neighborhoods still of interest to retailers?
Stone: I think so. If you go back to when residential was built on top of retail in the 1920s, ‘30s and ‘40s, you saw that come back into vogue in the past 10 years. It didn’t have to be regional per se, or down the street from a regional mall. If you have something that’s convenient for people and that fits into how they run the rest of their lives, you’ll be able to find a market for tenants. There is a niche in the neighborhoods for everyday needs retailers.
Kornberg: Many retailers, out of necessity, are being forced to go to landlords and ask for rent relief. A lot of landlords aren’t able to provide that relief because of restrictions — whether its loan covenants or something else. There are virtually no retailers in today’s market that aren’t being opportunistic to their leasehold agreements and looking for relief. If they are successful in 25 or 40 percent of leases, that’s a pretty good hit rate.
SCB: We’ve heard that a lot of retailers who are getting relief are causing their co-tenants — who are doing well — to ask for relief. Some think that because one gets it, everyone is entitled to it. Have you found that to be true?
Sy Taxman
Taxman: Unless a tenant has been with us a number of years and unless they can provide us financials, they won’t get it. On the other hand, if we are dealing with a local tenant that has been with us for a number of years, rent relief is granted almost automatically. We talk about this in theory. The problem is that those of us who actually own these properties know that these leases have been assigned as additional collateral to the lenders. Modifications of leases are not just a matter of calling your landlord. This is a process. There are many situations where the mortgages have been sold and you have no one to talk to about lease modification. Even though you may want to grant a modification to the tenant, technically, you’d be under default in your mortgage. It is a complex issue. As a general rule, we as a company will provide relief for local tenants if we know the tenants, if they’ve been with us for a number of years, if they are not in default and if they come to us before they are in significant trouble. If they default on their lease, don’t pay their rent and then want modifications, we won’t even talk about it. Our occupancy rate in the properties we own is just under 94 percent. That requires a lot of hands on work.
SCB: On the legal side, are you seeing issues like this from your clients?
(Left to right) Aaron Gadiel, Jonathan Payne, Marc Joseph, Glen Todd and Terry McCollom
Joseph: We are not seeing as much leasing work. We are seeing some restructuring work, and some times we see some concessions in leases while we are restructuring the rents. We have a deal now where the landlord client has a number of locations with a particular tenant and we are talking about restructuring all the leases [for that tenant]. Some of these will be terminations, some will be new leases and there will be some rent concessions and termination of option rights. Landlords are bending a little bit right now, but they also want to get something out of it. They want to help their stability and extend the lease terms to get something in return.
SCB: Are you seeing activity in the Chicago area improve?
Schutter: I have been leasing for a long time. At Newmark Knight Frank, we have over 40 projects — over 5 million square feet of retail — that we’ve picked up of third party leasing. From October to May was probably the deadest I’ve seen in my 20 years in the business. In the last 4 or 5 months, we’ve seen activity and we’re getting leases done. We’re sitting on 10 letters of intent that we’re negotiating right now. The activity is very much discount oriented. Location-location-location is still the bottom line. We had a high profile Michigan Avenue corner where we had three national tenants as back-ups. We completed a deal on the space. We have several great downtown listings and some suburban land.
(Left to right) Brian Kozminski and Adam Secher
Secher: In some of the outlying secondary and tertiary markets, there is certainly a lot of inventory. In some of the prime urban markets, whether that’s downtown Chicago or some of the regional markets like Old Orchard, Naperville and Schaumburg, there is still demand for space. Some of the deals that we are seeing are placeholders. We are not seeing any big, long term leases at market rates. We are seeing tenants take advantage of market conditions or signing short term leases with options so they can get in the market and test the waters. Landlords would rather have someone occupying the space, even if it is at a discounted rent.
SCB: Are there areas of the city where retailers are taking advantage of the lower rent rates and higher vacancy? Maybe somewhere that they wouldn’t have been able to go 3 years ago, but now they can afford to look?
Secher: There are certainly some active tenants. Some of the restaurants, specifically the quick casual restaurants like Chipotle, are looking at targeted markets and deciding now is the time to act.
(Left to right) Marlon Stone, Peter Eisenberg and Ben Wineman
Eisenberg: Aldi is also going crazy right now. Landlords who would not have considered Aldi are looking hard. Aldi has strong credit as well. Needs-based retailers are doing well. Jewel has also opened some new stores, like at 119th and Marshfield, and it is redeveloping a store near Southport and Addison.
Kahan: The stores who are expanding are being very selective. The locals, surprisingly enough, are strong; they have a lot of cash. There are a lot of independent grocers expanding. If you have a business that is not reliant on a bank, you can expand. Landlords are financing some retailers. It is a result of the economy. We are digging deeper into our pockets and we’re doing things we wouldn’t normally do. Some of our banks are going along with us. It requires more cash going into a deal than anyone wanted to put in. It is a reality we are going to have to deal with for a year or two. Expansion is going to be a joint venture between the retailer and developer.
Gadiel: Because of the national retailers’ shutdown, the local tenants have now had the opportunity to get into projects that they wouldn’t have been able to enter in previous years. In our case, we made a conscious decision to go after the local tenants.
SCB: Do local tenants have the financial staying power?
Gadiel: We will see. There are a lot of good local tenants that can operate a business as well, if not better, than some national tenants. They may not have the same credit rating. Right now, you have to think out of the box. You have to take a risk. We do our due diligence and we look at how long they’ve been in business and what their management is and who is behind them. We have a strong group of local tenants.
SCB: A lot of owners are riding with mom-and-pop tenants during this time. They feel it is better to have them underperforming than have a dark store.
Schutter: We represent a high profile center in Bloomington, Illinois, anchored by Jewel and Best Buy. We are out to lease with a 1,200-square-foot monument store. This is normally not a tenant you would look for in a strip center, but they have been in business for 65 years and they have three other locations. They are a long-term player.
McCollom: I had a 1,000-square-foot vacancy and a politician came to me about it. I’m getting low rent, but he is going to pay the electricity and gas through the winter.
SCB: Rob [Rowe], you are working with one of the biggest needs-based retailers who is making a push into Chicago.
Rowe: CVS is making a push here. Right now, CVS has targeted corners that we’re going after. We are about to close on one [site] that CVS has been looking at for 10 years. They are realizing that some of the locations are chances of a lifetime. CVS is trying to make deals. They scrutinize things a lot. They are one of the best credit tenants out there who’s making deals now. They try to buy more than do ground leases as they did in the past. That change was driven by the change in the net-lease sales market. To keep the coffers filled, they would rather do purchases today. The main targets are the urban areas; the dense areas where the people are. We have a site in Bucktown we never would have gotten before. There would have been five banks going for these corners before. They are out of the market. We are doing deals in the sticks, and we are land banking because we’re buying at a discount. Another client who is very active is Export Fitness. They have a new model they call their Express model. This is 10,000 to 12,000 square feet. We’re going into some of the areas where the population isn’t enough to do a 45,000-square-foot club. They payback is quick because they don’t have to put as much money and the landlord contributes. They are inexpensive entertainment. It is a bar without booze. They are taking a lot of box space. The biggest challenge I have today is co-tenancy. Some retailers are restricting health clubs.
Sy Taxman and Richard Kahan
Kahan: Using the health club as an example, there are very few businesses that are bringing the same customer back to the same location two to five times a week. They are also active early morning to late at night.
Todd: Parking is one of the most sensitive issues to a retailer’s business. We have centers that we are going to leave because the owner doesn’t have enough parking. If you are an older center with a huge parking field, that is great. But newer centers have the smallest parking lot they can. That will put you out of business faster than anything else. We have walked away from a lot of deals that we wanted to make because we were afraid the parking would kill us. It is a problem we can’t fix once we are in place.
SCB: As a retailer, how do you see the economic climate in general?
Todd: I’ll give you the corporate perspective. Perception is a huge thing right now. I have a lot more people touching our deals. The perception is that we are going to get rent reductions on every new and renewal deal we make right now. I have someone a few levels above me measuring my ability to make lower rent deals today than I made a few years ago. That’s part of our approval process. You’ll see deals are getting slower because everyone is being more cautious about the decisions that we’re making. I am doing renewals where I can’t get a rent reduction, but instead of taking a 5-year option I will take 3 years. A friend of mine also works for a publicly traded retailer. It was recently publicized that they had over 500 stores in the chain where half the stores have leases that are expiring in less than a year. I called him and asked him how he could possibly manage this. He said it wasn’t accurate; that they had a lot of kick-outs in the deals and they never give the leases up. He would just call the landlord and modify the leases. Half of his chain can say goodbye to anything at anytime. It is a priority of their concept — no lease liability.
SCB: As a retailer, do you see any issues with landlords?
Todd: I can’t tell you how many landlords I’ve seen where, when they lose a tenant or two, they can’t maintain the center anymore. We were in 10 properties owned by a TIC manager that went bankrupt. When the parking lot lights don’t go on anymore or the water doesn’t work, our salespeople call us. These issues accumulate so it becomes a topic.
SCB: As a retailer, do you see the glass as half full?
Todd: Absolutely. We are actually up this year a little bit. We have some markets that are not so good, but we have others that are well. We are still postured to look at opportunities that we can take advantage of right now.
John May
SCB: John [May], how are buyers looking at the retailers in the properties that you are selling?
May: Buyers are looking at [retailers’] credit, but they are also looking at rent levels. Whether it is a small center or large center, it doesn’t matter. The people at this table that did such a good job negotiating those $35 to $50 per square foot small shop rents; the investors are marking those down, even if the tenant is in there doing well. If you look at the junior box anchors, those rents were approaching $18 per square foot a few years ago. The most recent deals are being done in the single digits with big landlord contributions. As investors look at these assets, they are not accepting the rent roll as something they can count on for the next 10 years. They are looking at every parameter in the rent roll. The second item they are looking at is the capital stack. The retailers drive the financial side, but now we are going to see the financial side drive the retail side. Grocery-anchored centers were trading at low 6 cap rates 3 years ago. Now, they are at 10 cap rates. We just did the largest transaction in the Midwest, and we were right at a 10. This was a 6 cap asset in years past. Also, the financing world has changed. You can’t get 80 percent interest-only financing or non-recourse financing unless you are coming with a very high equity stake.
SCB: James [Turner], what are the equity requirements today?
Turner: I’m hearing a lot of things that are affecting the rates. If you want me to be at an 80 percent LTV [loan-to-value] ratio, I’m fine: let me trend down your pro-forma rents by 30 percent per year and then apply a 10 cap. You’ll get 80 percent on that value.
Taxman: I’ve closed a loan in the last 90 days. You have to have cash. If you want to be in this business going forward as a ground up developer you better have cash. When you talk about a 70 percent loan, 30 percent of the project costs are being contributed by the developer as cash, not as attributed value. What’s happening in the financial world may be a benefit to all of us. We have to eat up a significant amount of excess inventory that’s out there. In order to do that we need to have less development going forward. The concept of having to be in business with cash is not unique. When I went to buy the only home that I have ever lived in for $30,000, I went to a savings and loan, where a friend of mine’s father was the owner. I asked him for a loan for $25,000. He told me he would loan me $24,000. I told him I didn’t have the $1,000 difference. He said, ‘That’s not my problem. Go find the money and we’ll give you 80 percent and you put up 20 percent in cash.’ These rules are not new. We need to get some stability back into the market. I don’t think we will see a recovery in retail until we see a significant recovery in employment. We also need to get the banks on board. The last time I went to see the doctor for a physical, I didn’t have to hear about his problems. I thought the doctor was concerned about my problems. I don’t want to hear the bank’s problems when I go in for help.
Payne: We keep using the term ‘think outside the box.’ What we are really saying is that we were so far from the fundamentals of retail that today, thinking outside the box is returning to the fundamentals of retail. Ultimately, we are going to return there because, at the end of the day, to get the financing I will have to require retailers to sign a permanent lease, not something with a 1-year kickout or at 30 percent below market rate. What we are seeing is a return to the fundamentals of retail. That is exactly what the Export Fitness Express concept is — driving traffic and generating sales. We build shopping centers: what else is more fundamental to a center than having traffic and generating sales?
McCollom: We always put cash into our deals. If you don’t have your sweat and blood in the deal, what are you doing? It is that simple in my opinion. I am doing some due diligence for a bank right now. I do a lot of rural real estate. I am examining a group of dollar stores for them. The properties are in horrible condition. If you don’t have a landlord taking care of these properties, what is the broker and the retailer getting themselves into? Brokers have to make sure they are talking to good landlords. We are a small company. It is interesting how we have survived with the big guys [as competitors]. We have always kept to the basics and we’re still sitting here. I am the president of the Chicago Association of Shopping Center Owners (CASCO). We have 35 members, all owners of centers in the Chicago area. We’ve only lost one member recently, and we’ve added two new members. That says something about where our industry is.
(Left to right) Marc Siegel, Ryan Murphy, Robert Rowe and Richard Dube
Dube: I want to compliment James [Turner]. He is the only banker here. We have taken advantage of the tax increment financing programs available in the different areas where we are active. With regard to CMBS and the financing system, you must have some insight on how much capacity is in the system?
Turner: The banks have been spending the past 10 years figuring out how not to use the balance sheet [to lend]. That led to the creation of the CMBS market and collateralized debt obligations. The banks didn’t do long term mortgages; all of that paper was being pushed off. Now, to change the mentality of the banking system to utilize the balance sheet heavily in this economic environment — I don’t think it’s going to happen. The banks will not be there to replace the CMBS markets when those maturities come.
Julmy: That’s the perfect storm.
Turner: There has to be some answer created for the CMBS program, and it will come out of people in this room. There are smart individuals who still understand that there are values in these properties.
SCB: As a bank, what do you see in the future?
(Left to right) Camille Julmy, Peter Caruso, Jim Schutter, Tim Thanasouras, James Turner and Keith Ross
Turner: The big question is: when are people going to start shopping again? When retailers can expand again and can pay a market rate that makes sense and pays for the land, construction and gives a fair return to the owner. Once that all happens, banks will be right back in there. Until it happens, we are shooting in the dark.
Julmy: The capital system, as we knew it, died about a year ago. Who would have done a project with 30 to 50 percent of equity then? Now, we have an added problem of the rents going down, or the perception that rents will go down. We received our loan for MetraMarket on August 27, 2008, and, frankly speaking, if we had waited 2 weeks, we would have said forget it. We would not have put 50 percent equity in that deal. It’s not a large project. It’s 100,000 square feet that makes sense.
Schutter: It is a difficult environment. If you work hard, there are opportunities. It is about positioning yourself to take advantage of the opportunities. We are finding what is unique about every project and capitalizing on that unique opportunity.
SCB: How is Michigan Avenue faring in this economic climate?
Julmy: Michigan Avenue is still one of the great avenues of the world. It is going through a tough time. The sales are down anywhere from 10 to 30 percent or more. The retailers aren’t happy, but the avenue is crowded. People are not spending. Hopefully that will change when employment picks up. The occupancy is still high.
SCB: Tim [Thanasouras], you’ve started a new company during this time. How have you weathered the storm?
Thanasouras: I looked at the facts and the fundamentals of our business. The industry has been operating with a dual income [household] economy for a long time. For a lot of families, the primary income is gone. When I meet with my clients, I tell them the fundamental thing we must do is keep the lights on in the stores. Having dark tenants doesn’t help the tenants next to them. A full center is better than a vacant center. This economy will also wash out a lot of competitors. I went to a party a few years ago and someone asked me what I did. I told them I was in commercial real estate. The attorney that I was talking to also mentioned he owned some shopping centers. A restaurateur also said he owned some buildings. I think now people like that have been burned and they don’t want to be in the industry anymore. Those were the people who went to the bank for cheap money without knowing the fundamentals of the industry. They will be gone sooner or later.
Taxman: We also need the washout to happen in the product. After the Savings and Loan crisis, we had the creation of the Resolution Trust Corporation, a clearinghouse for excess properties. We are going to need that again.
[Reply]
James Reply:
October 19th, 2009 at 2:11 pm
@SEAN, thanks for the excerpt from the recent Chicago Retail Roundtable. Ms. Julmy’s comment on Michigan Avenue caught my eye: “The retailers aren’t happy, but the avenue is crowded. People are not spending.” How true! I work on Michigan Avenue and, based on the crowds on the street, all looks well. But, the scenes within the various vertical malls and individual retailers are much different. “Masoleum” is a word that comes to mind, particularly away from the street on the upper levels of the vertical malls.
[Reply]
SEAN Reply:
October 19th, 2009 at 7:34 pm
@James, You got it. As soon as I saw this I tried to post it, but it took five atemps.
[Reply]
SEAN
October 19th, 2009 at 8:01 pm
Let me cut through all the spin. Retail in the suburbs for the most part is on life support & what growth there is, is taking place in urbanized areas as cities get rediscovered. You can also add suburban cities that have vibrent downtowns with activity at all times of the day.
[Reply]
James Reply:
October 19th, 2009 at 10:15 pm
@SEAN, the suburban city with the most vibrant downtown, in my neck of the woods, is Naperville, some 25+ miles west of Chicago. In return for such vibrancy, the trade-off is that these suburban towns begin to seem more and more urban- with traffic tie-ups and parking garages. But what a downtown! Naperville is great. Especially for folks like me who live in smaller suburbs with sleepier downtowns. We get all of the shopping and entertainment options of a vibrant downtown in Naperville, without the hassle of having to go to downtown Chicago. And, then, after we’ve “done the town” in Naperville, we go home to our smaller, sleepier suburb just a couple of towns away.
[Reply]
SEAN Reply:
October 20th, 2009 at 9:01 am
@James, Click on my name above any post.
White Plains NY has been in growth mode for close to a decade untill the ressession hit. Has naperville been adding housing units to it’s downtown core? Also does the CTA or it’s sister agencies Pace or Metra serve the city with frequent service? I hope so, it will keep the traffic levels down plus garage parking keeps cars out of site while keeping streets active with people throughout the day & night.
[Reply]
James
October 20th, 2009 at 9:32 am
Naperville is served by Metra, although the main station is several blocks north of the downtown section. There is Pace service, too, but it is likely under-utilized. Pace is definitely under-utilized where I live, a couple of towns to the north and east of Naperville, in Glen Ellyn. I honestly think most people access downtown Naperville by car.
The thing about suburban Chicago is that it has excellent mass transit to and from downtown Chicago. But, using mass transit, such as Pace, between suburbs, just doesn’t occur to most people (including me).
Naperville, like nearly all of the towns along the train lines in suburban Chicago, has been adding housing units to its core area, frequently with retail spaces on the street level. That activity, I believe, has slowed in the current recession. The center-piece of Glen Ellyn’s new downtown development plan (yet to be officially adopted by the Village Board) is the addition of a lot of downtown housing. Implementing that aspect of the plan may be frustrated by the current economic climate.
[Reply]
SEAN Reply:
October 20th, 2009 at 2:54 pm
@James, Over time those housing units will be filled do to the fact that preferences are changing. Downtown living with frequent transit & local shopping is in, meanwhile suburban sprawl is slowly falling out of favor with worsening traffic condissions.
These towns know this, but the question is how quickly can these communities react to sed market prefferences.
[Reply]
James Reply:
October 21st, 2009 at 10:56 am
@SEAN, when the housing industry recovers from this current recession, I agree that condo and similar denser types of housing developments near the downtowns of our suburban cities will take off. And that will be a good thing.
However, I also believe the kind of suburban sprawl that we saw pre-recession will resume when the economy recovers, but not at nearly the same rate. There are just too many costs associated with sprawl- in terms of time, fuel, and wear and tear on cars and roads, etc. So, let’s hope one positive aspect of the recession is that suburban sprawl will be permanently slowed down, even if not stopped altogether.
[Reply]
SEAN Reply:
October 21st, 2009 at 2:12 pm
@James, You are almost there with one minor detail. do to the ecconomic downturn housing prices fell the sharpest the further away you went from a cities core. In those areas the population is starting to move back toward the cities. As the population ages independence for our seniors is key & these new housing developments are a primary reason there popularity has been increasing. If there is a mall & other retail projects nearby or within bus distence, a towns vibrency also increases. This also applies to younger ages as well by allowing everybody to be able to travel without. car dependence.
[Reply]
James Reply:
October 21st, 2009 at 4:40 pm
@SEAN, true enough. The older set by and large won’t want the tract house McMansion but instead will opt for the convenience of a condo or townhouse within walking distance or a short drive to retail areas.
But, the suburban fringe could continue to be attractive to younger people with families because housing is cheaper in the outskirts, especially when measured by square footage. You and I and the urban planners recognize that the suburban fringe is not so affordable when the time and expense of a long commute and long drive times to basic conveniences are considered, but others may be blinded by the shiny promise of lots of square footage in a brand new package.
[Reply]
SEAN Reply:
October 21st, 2009 at 7:00 pm
@James, Well said. I’m glad that someone gets it.
Lets go another step. What about the areas around Old Orchard, Oakbrook, Northbrook Court & Hawthorn Center. Do any of those malls have neighborhoods ripe for dencer redevelopment? I intentionally left off Woodfield do to the existing development around I-290 & Woodfield Road.
FYI check out the Victoria Transport policy Institute at vtpi.org That is where I did a lot of my research. The information is quite valuable.
[Reply]
SEAN Reply:
October 21st, 2009 at 7:01 pm
@SEAN, http://www.vtpi.org is the adress.
[Reply]
Chip Reply:
October 22nd, 2009 at 2:21 pm
@SEAN,
Teardowns have been a major problem in the Chicago burbs. Perfectly good pre-WWII houses get razed for McMansions. Naperville, Hinsdale and Downers Grove seem to be hardest hit by this problem. Ripping out older homes for cookie-cutters is no way to build a sense of community.
[Reply]
SEAN Reply:
October 22nd, 2009 at 6:59 pm
@Chip, You misunderstand. I don’t want that kind of development. I’m talking about padestrian friendly development that is walkable & is transit accessable. Reusing existing blocks & lots to provide new housing & or retail in downtown areas where transit already opperates.
Many mall parking lots could be redeveloped in the same manor. It just takes some out of the box ideas.
When you think about it, communities are desperite for new sources of tax revenues. What a way to achieve such a goal & stop the sprawl machine at the same time.
Infact let me ask a question. How do you like having rows apon rows of sprawling subdivisions that all look the same? Add to that not having anything of importence within walking distence. People deal with this on a daily basis & it is worsening. I’m saying there is a better way.
[Reply]
James
October 22nd, 2009 at 7:40 am
Sean, of the suburban Chicago shopping centers that you list, I am most familiar with Oakbrook. There is definitely potential for denser development around Oakbrook. It may take some tearing down of existing housing in nearby Oakbrook Terrace,but the potential is there. However, Oakbrook will need some improvements before it can be truly be a walkable destination from nearby neighborhoods. Sidewalks along the major streets are needed, as well as some kind of pedestrian promenade through the parking areas and ring road so that walkers can navigate their way across the asphalt in relative safety.
Once within the open air Oakbrook mall areas, Oakbrook is very pedestrian friendly. But, the neighborhood surrounding Oakbrook is not pedestrian friendly.
West of Oakbrook on 22nd Street is Yorktown Mall. Yorktown is a more traditional shopping venue for suburban Chicago (it’s enclosed) and like Oakbrook seems to be in relatively healthy economic footing, even with this recession. There has been a lot of mutli-family condo/townhouse development around Yorktown in the past 10 to 15 years, and (unlike Oakbrook) this denser type of housing is within easy walking distance of the shopping center. While there are acres of asphalt surrounding Yorktown, there are condos abutting the mall property, unlike Oakbrook. To the north of Yorktown, there are a lot of ranch-tpe homes on large lots- I could see that area being redeveloped with denser housing.
[Reply]
SEAN Reply:
October 22nd, 2009 at 7:10 pm
@James, Thanks. Take alook around this http://www.vtpi.org. Tell me what you think.
[Reply]
James Reply:
October 27th, 2009 at 1:25 pm
@SEAN, I read the “Where We Want to Be” article and found it very interesting. It touches upon the subjects that we have discussed. I do believe that there is a demand for Smart Growth types of neighborhoods and housing. My personal observations of suburban Chicago, while anecdotal, definitely suggest a demand for Smart Growth living.
For example, there is great demand for housing in the older established suburbs along the train lines in Chicago (of course that demand recently has been depressed, like all demand for housing, because of the recession).
Evidence of this demand: (1)Housing prices are higher in the “train towns”, even if the houses are smaller or less modern than houses in the far flung car dependent suburbs. (2) developers and individual homeowners like the train towns so much that they will go to the expense of buying & razing the older houses, replacing them with larger modern structures (the “tear down” phenomenon, which I do not necessarily support). (3) Most of the downtowns in the train towns have seen new condo and retail developments in recent years.
One might conclude that the thing behind the popularity of the train towns is, well, access to the train to downtown Chicago. That is undoubtedly a major factor. But, I think that is becoming less of a factor. Many people who live in the train towns do not use the train to commute to work. They work in the suburbs (Oak Brook, Schaumburg, Fermilab, the I-88 corridor, etc.) and don’t need the train, but for the occasional weekend jaunt into the City. These non-train folks are moving to the train towns, I believe, because of the pedestrian scale of the towns- the walkable streets, unique retail shops within a short walk or drive from their homes, and the general ambience of a village as opposed to a housing development. In short, these folks are attracted to a Smart Growth kind of living.
[Reply]
SEAN
October 28th, 2009 at 8:40 am
Right on!
Take a look at this from the same site.
Online TDM Encyclopedia
Updated May 2009
Transportation Demand Management (TDM, also called Mobility Management) is a general term for strategies that result in more efficient use of transportation resources. This Encyclopedia is a comprehensive source of information about innovative management solutions to transportation problems. It provides detailed information on dozens of demand management strategies, plus general information on TDM planning and evaluation techniques. It is produced by the Victoria Transport Policy Institute to increase understanding and implementation of TDM.
Contents
Overview
Strategies To Achieve Specific Objectives
Best Strategies For Various Organizations and Stakeholder Groups
TDM Strategies
Improved Transport Options
Incentives To Use Alternative Modes and Reduce Driving
Parking and Land Use Management
Policy And Institutional Reforms
TDM Programs and Program Support
TDM Planning and Evaluation
Reference Information
The research here is fantastic. It has come quite handy at times.
[Reply]
James
October 28th, 2009 at 7:46 pm
Sean, another point made in the “Where We Want to Be” article is that the demand for living in Smart Growth communities has driven up the housing prices in those communities, making them unaffordable for a lot of people. Again, my observation of suburban Chicago bears this out.
The train towns in DuPage County are, by and large, expensive towns to live in. Housing is more expensive in these towns, and that expense is driven by demand. In the further reaches of DuPage and adjacent counties like Will, Kane and Kendall, the sprawl is created by subdivisions housing people who cannot afford to live in the train towns. These subdivisions have fancy names and elaborately landscaped entranceways, but the houses are of the tract type.
Granted, I am simplifying things a bit. There are undoubtedly people who live in the far corners of Chicagoland because they like the auto-mobile-oriented semi-rural lifestyle. But, I believe many of these people are driven to the outer-sprawl areas simply because they cannot afford to live closer-in.
[Reply]
SEAN Reply:
October 29th, 2009 at 4:58 pm
@James, To illistrate your point, according to the TTI Texas Transportation Institute at UT Austin a residential property becomes 40% more valuable when rapid transit is within a half mile or so of that property. Likewise for commercial property. The figure is around 50%.
example
In 1995 NJ Transit started service on the Morris & essex Lines from Dover NJ to Penn Station NY. prior to this a transfer to PATH at Hoboken was required, As a result of the service change home prices along the line increased 20% right out of the box. This includes areas such as Maplewood, Milburn, Summit, Madison & Chatham.
I’m sure Chicago has similar communities.
[Reply]
James
October 29th, 2009 at 7:26 pm
The good news is that there is demand for the more densely built, transit-oriented communities.
The flip side of that demand is that prices are driven up and the communities are made unaffordable to much of the middle class and lower middle class. The need, then, is for affordable smart growth communities.
[Reply]
SEAN Reply:
October 30th, 2009 at 9:30 am
@James, Legislation is often put into place to combat such issues. In Portland Oregon for example the “Metropolitan Housing Rule” requires developers to construct below market rate buildings in the same neighborhood as there market rate counterparts. The Pearl District just outside downtown is the cities most expencive area in the city for housing. However there are several buildings that are below market rate & you wouldn’t know it because they blend in.
In many cases a Developer is required to either make a fixed percentage of units afortable or pay a buyout fee per unit to be used to construct such units.
In Arlington VA & White Plains NY 10% are required to be afordable. When such a requirement is in place developers tend to go somewhere else where it is more profitable for them. That is a tipicle move.
In the WP example, condo & apartment construction vertually came to a halt when the requirement for afordable units whent from 6% to 10% & the buyout fees more then doubled. So there’s a flipside to that flipside. Mind you this happend in 2007 before the ressession began.
[Reply]
Catbus
November 12th, 2009 at 4:02 pm
I will always remember Chicago Place as the shopping center where I unexpectedly spotted my ex-wife less than six months after our divorce — moments after she spotted me, evidently, since when I saw her she was hastening in the other direction, not making eye contact.
[Reply]