CHICAGO-”Cautious optimism defines the 2003 Chicago retail outlook,” says Marcus & Millichap Real Estate Investment Brokerage Co. senior vice president and regional manager Greg A. Moyer. Despite higher unemployment in the Chicago market, the company’s recent retail research report shows slightly higher rents for retail space, as well as lower capitalization rates for the assets that are trading.

At 9.4% so far this year, capitalization rates have dropped for three consecutive years, Marcus & Millichap reports.

However, the report also notes construction is expected to slow 45% next year to 1.9 million sf in 2003, as developers continue to pull projects off the drawing boards. This year, according to Marcus & Millichap, retail construction is down 24% from 2001. Even so, the supply may still be outpacing demand, as more the number of retailers in the market for new space is off 15% to 20%, according to Marcus & Millichap.

While overall vacancy is expected to close the year near 12%, Marcus & Millichap predicts a 1.2-percentage point drop over the next 12 months. In addition, rents should increase by 3%, the company forecasts.

Marcus & Millichap reports recent sales have ranged from an $18.56-million sale of the 193,000-sf Thatcher Woods Shopping Center in west suburban River Grove to ubiquitous Walgreens outlets from from $4.5 million to $5.8 million in Park Ridge, Mundelein, the Northwest Side of the city and Des Plaines.

The priciest deal remains the $753 per sf paid for a 22,900-sf storefront at 701 N. Michigan Ave. while the best price per pound was $55.36 per sf for an 83,100-sf Alamo facility at 3800 N. Mannheim Rd. in Franklin Park, less than a mile from O’Hare International Airport.

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