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The International Council of Shopping Centers’ Chicago Deal Making conference wrapped up in that city last week, where about 260 exhibitors displayed retail opportunities around the metropolitan area as well as the Midwest. One company that is familiar with the area is the Oakbrook Terrace, IL-based Mid-America Real Estate Group. The real estate services firm says it leases and manages 28 million sf of retail space in the region and represents about 100 retail tenants. The firm also releases annual studies on the retail market in Chicago. This year’s report found that retailers are searching for 78 million sf in the metro area, up 16% from last year. And the demand is forecast to continue for at least a decade. Jeff Kuchman, principal at the firm who is also director of tenant brokerage, spoke with GSR about trends in Chicago retailing.

GSR: What is fueling the retailer growth in the Chicago area?

Kuchman: In the first place, you have a very vibrant, major city. You’ve got a market that gets continuously fueled by the overall magnetism of Chicago as a Midwest hub for young, professional people to come and start careers and families. That is a big part of the equation. When you combine that with the fact that most retailers who come to find that their sales are by and large better than move of their nationwide comps, then that’s a healthy combination to attract additional growth.

GSR: What makes it more of a growth market than the rest of the Midwest in general?

Kuchman: I can tell you from our perspective, representing several national and regional chain stores, we can say that their sales in Chicago are 10% to 15% higher than most of their other Midwestern stores.

GSR: Within the metro area, where are you seeing the most retail growth geographically?

Kuchman: That’s one of the unique elements of the study. We typically aren’t seeing growth in one area at the expense of another area. What you find is a very even and concentric pattern of growth. You do have certain hotspots from time to time. In years past, it would have been Lake and McHenry counties. In the last four to six years, it’s been Will and Kane counties to the southwest. There are occasional hotspots, but they don’t come at the expense of measured growth elsewhere. Not only are you seeing a redefinition of Metropolitan Chicago, you’re seeing our definitions to the north now extending into Kenosha, WI. Definitions to the west are going out to Rockford and DeKalb. To the south, it’s south of Interstate 80 and well into Indiana. That is largely redefining the greater Chicagoland area. While all of that is going on around the periphery, you’re seeing absolutely unprecedented growth back into the urban markets of Chicago neighborhoods. When you put those two factors together, it’s a powerful formula.

GSR: Are you still seeing big-box growth in urban Chicago?

Yes, and the real question on everybody’s lips now is the affect of the pending local legislation severely curtailing through the wage ordinance the growth in that sector in the urban markets. Everybody’s waiting with bated breath to find out what happens in that area whether that will in fact compel big-box retailers to find options outside the city.

GSR: Is finding sites in urban areas a problem for them right now?

Kuchman: It is an issue. Most of the big boxes historically have been fairly inflexible in terms of their footprints and operational demands. But they realize that this market has such incredible potential that you’re seeing a redefinition of acceptable footprints for the big boxes. You’re seeing new formats being applied to city and urban neighborhoods. You’re seeing a lot more flexibility today and in recent years than you have in the past. Merchants such as Target, Wal-Mart and Kohl’s, as well as Best Buy and Circuit City are doing some very unusual things to get into the city proper.

Do you see the retail leasing of the Mills Corp.’s 108 N. State St. being a problem because of that company’s struggles?

Kuchman: Bear in mind, Chicagoans have been looking at Block 37 [the project's former name] for the better part of 30 years. We’ve all been waiting to find out what’s happening there. With the exception of some relatively bleak periods of time on State Street, there haven’t been too many eras when the demand wasn’t there to fuel that development. It’s always been how much and what type as opposed to getting interest to show up. I think that Block 37 will eventually come together and what remains to be seen is the shape and form that it takes.

GSR: Is it the same issue with the Carson Pirie Scott store?

Kuchman: I think so, but whenever you’re trying to retrofit a historic building like that, you’ve got challenges that go well beyond having a blank slate across the street. There will have to be some creativity applied to the Carsons redevelopment, but there is enough growth and demand that somebody should figure this thing out. That’s one of the great residential success stories in the city right now, the Loop, the near South Side and everything going on there is really supplanting the Gold Coast and Streeterville as the place to be if you move back into the city.

GSR: Has the sale of Albertsons had an impact on local grocery chains?

Kuchman: For the most part, as it relates to Jewel, it’s been business as usual. They remain an active player on the growth side of the ledger and continue to want to maintain, and if at all possible, improve their dominant market position here regardless of the fact that they are under new ownership. So we’re not seeing any adverse effects of the sale of the Jewel stores by Alberstons to Supervalu.

GSR: What will you think will be the long term consumer reaction to Marshall Fields becoming Macy’s now that Federated is pushing their advertising?

Kuchman: I think the jury is out. There still is an awful lot of negative feedback on the street about Macy’s conversion. However, if they bring value, service and selection to the consumer, I’m pretty confident that they will show up and show Macy’s just as they would have at Fields.

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