Space Still Tight in Local Retail Sector

However, the local economy remains healthy overall with relatively low unemployment, which bodes well for this market's retail sector.

A. Rick Scardino, vice president of Grubb & Ellis' retail service group in Rosemont, IL, recalls a visit with a client to Old Orchard Shopping Center in north suburban Skokie in mid-January. The holiday sales and January mark-downs were over, he says, but they couldn't find a parking space at the open-air mall with an outdoor lot as well as covered parking.

"I don't think things are as dire as some think," Scardino says. "We're still finding that in good markets, space is still tight."

Scardino says there remains pent-up demand in the retail market, and it doesn't help that some retailers who have gone out of business are continuing to pay rent on vacant space that could be put to more productive use. "It's tough to lease space... if no one's returning phone calls," Scardino says.

Likewise, the demise of theater chains has created opportunities for new uses such as banquet halls or health clubs, Scardino says, but some former moviehouse space is tied up in bankruptcy court proceedings.

More encouraging is news Target Corp. is taking over space in some Montgomery Wards stores, and there could be other users on the horizon, Scadino says. "I think people are waiting in the wings," he adds.

While new shops continue to pop up in the Downtown market, there are no shortage of retailers scouting out sites or signing leases for space in renovated suburban Downtowns, such as northwest suburban Arlington Heights and north suburban Deerfield. West suburban Oak Park also has a retail component to a $30-million development proposal. Northwest suburban Barrington is the latest to jump on the redevelopment bandwagon. And despite the success of upscale lifestyle center Deer Park Town Square, Barrington officials have been told to expect retailer interest in their village.

"There's enough demand here that (retailers) will be able to provide a new store and a competing store, provided there's critical mass created" at a proposed 175,000-sf mixed-use center, says Mid-America Asset Management principal Richard E. Spinell.