A Solid Chicago Retail Market Faces E-Commerce Challenge

Jim Schutter of NGKF says finding medical office tenants could be a possible solutions for landlords that have less demand from their retail tenants.

CHICAGO—The Chicago retail market has shown a good deal of strength since 2015, but the growth of e-commerce continues to limit the amount of space taken by tenants. That was the finding of researchers from Newmark Grubb Knight Frank, who plan to release their Chicago Retail Equinox Report at the International Council of Shopping Centers conference in Las Vegas this week.

Both the downtown and suburban retail markets experienced positive absorption for a third consecutive quarter. As a result, overall vacancy declined 20 bps to 7.8%. Although the market got off to a slow start in 2015, since then absorption totaled over 3.6 million square feet. At 7.1%, the downtown’s vacancy rate improved by 260 bps after 106,000 square feet of absorption. The suburbs posted 616,000 square feet of absorption, driving vacancy down 10 bps to 7.9%, the lowest rate since late 2008.