New Ground-Up Retail Development Returns

CHICAGO—As they looked forward to the latest Chicago Deal Making conference, held today and tomorrow at Navy Pier by the International Council of Shopping Centers, officials from Next Realty LLC told GlobeSt.com that big changes have recently occurred in the metro region's retail sector.  

After years of recession and then a modest recovery, landlords are finally seeing some benefits. "If they are in A locations, tenants are now willing to pay up," reversing a long period of stagnant rent growth, said Alex Katz, director of acquisitions. "There is an urgency among retail tenants that they didn't have a short time ago and we're seeing them become very aggressive in securing the top locations." 

That aggression has given owners and investors the confidence to redevelop the A and B locations, he said. Furthermore, the extraordinary popularity of retailers such as Mariano's is finally "allowing new development to occur."

"I think a lot of people will be finalizing deals at this conference," he added.

"It is getting harder to get deals done," said Eteri Zaslavsky, managing director, due to the intensifying competition for properties. But the company's pipeline of likely acquisitions has swelled recently. REITs and other institutional players seem to have decided to focus on power centers and unload the smaller properties that are the bread and butter of firms like Next, which mostly buys centers for less than $50 million.   

And Zaslavsky remains quite optimistic about retail's prospects over the next few years. "The economy is still improving and interest rates are likely to remain near historic lows." Best of all, "nobody believes the internet is going to consume all of us." This is a profound change from a few years ago, when many feared e-commerce threatened brick-and-mortar stores. 

In fact, when she considered what the conditions for retail were just before the recession hit, Zaslavsky said, "it's as good as it was back then."