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CHICAGO-Despite a slowdown at cash registers, values of retail properties continue to remain strong here, says Marcus & Millichap Real Estate Investment Brokerage Co. senior vice president and regional manager Greg A. Moyer. While there are signs the economy is pulling out of the its slowdown, values should continue to rise, Moyer predicts.

“Retail vacancy inched upward and rents have softened slightly, but demand will remain strong for solid properties,” Moyer says. “Construction should slow in response to tighter lending requirements and a general caution in the market regarding retail properties, which should bode well for the long-term health of the retail market.”

However, this year’s average of $89 per sf follows a “somewhat lackluster year in 2000,” according to the report prepared by Marcus & Millichap senior market analyst Frank J. Kupiec.

Besides the lofty $545 per sf paid for the Barney’s at 25 E. Oak St., the market has been buoyed by the sale of the popular triple-net-leased Walgreens outlots, ranging from $271 per sf to $372 per sf. Seven sales totaling $31.3 million, or $3.8 million more than the price paid for the 50,488-sf Barney’s, have been recorded on the city’s Northwest Side as well as the suburbs of Grayslake, Hillside, Lake Villa, Lansing, Libertyville and Lincolnshire.

“Obviously, investors are still willing to pay top dollar for solid retail properties,” Kupiec notes.

Closer to the norm, though, is the recent closing of 84th Street Plaza in southwest suburban Bridgeview. The fully-leased 14,000-sf shopping center on busy Harlem Avenue sold for $1.15 million. “The buyer made a solid investment,” says Inland Real Estate Sales associate Dan Stratis, who brokered the deal with fellow Inland associate Joe Kunst.

Owners are seeing average vacancy rates of 10.3%, according to the Marcus & Millichap report, up from 9.9% last year as retailer bankruptcies and store closures have had an effect on the market. After hitting a record $15.11 per sf in the fourth quarter of 2000, the average retail rent has dipped to $14.91 per sf. Vacancy rates are expected to rise further while rents continue to soften as new retail space begins hitting the market, Kupiec predicts.

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