chi-woodman buffalo grove (2) In suburban Buffalo Grove, Woodman’s Market will anchor this 236,000-square-foot center due for completion later this year, one of the few major new retail projects in the region.

CHICAGO—Regional developers continue to show caution in the face of the nation’s retail meltdown. But tenant demand, much of it from users that don’t compete with the internet, keeps shrinking the amount of available space.

In fact, “during the past four years, net absorption has averaged five million square feet annually, outpacing completions,” according to a new market report from Marcus & Millichap for the second quarter. “Many boutique shops and restaurants have backfilled stores in shopping centers and strip malls, pushing down vacancy in multi-tenant buildings during the past year.”

The firm forecasts that in 2018 another 4.9 million square feet will get absorbed. At the same time, developers will only open up another 1.9 million square feet of new space, and that should push vacancy down another 60 bps to a 12-year low of just 6%. Last year, the retail vacancy rate declined 50 bps.

Fitness, beauty and discount retailers have led the way in the past year and leased up many storefronts. LA Fitness, ULTA Beauty and Dollar Tree each completed several leases in the first quarter of 2018, according to M&M.

Developers and lenders, however, have not shied away from well-located projects in high-income areas. Sterling Bay will soon transform the old Finkl Steel site near the Lincoln Park neighborhood into Lincoln Yards, a collection of new retail, housing and office space that will feature an open-air market, restaurants and a new professional soccer stadium. Amazon reps have already toured the area to scout out a possible location for their HQ2.

And on Fullerton Ave. and Lincoln Ave., developers Dan McCaffery and Hines Interests recently broke ground on their Lincoln Common project. More than 100,000 square feet of retail space anchored by an Equinox gym will help replace the old Children’s Memorial Hospital site.