"The South Loop has very strong market characteristics," says Bill Miller, vice president with Chicago-based Appraisal Research Counselors, a real estate appraisal, research and consulting firm. "It is an absolute change in direction from small retailers to what will become explosive growth over next five years."
The South Loop, with direct access to Lake Shore Drive and Interstates 55, 94 and 290, has become a breeding ground for residential development. In Q1, Appraisal Research Counselors estimated 37% of all condo development in the city was taking place in the South Loop. With residential development outpacing retail by a landslide, community residents have few options at this point.
"There is a lot of affluence that has moved into the South Loop and it's underserved," says CB Richard Ellis' Lisa Carolan. "This market is a great opportunity for investment; rental rates are high and they are achieving the same numbers we're seeing in the more mature retail markets." Carolan says rents on the southend are going for $25 to $35 per sf, depending on which floor a retailer is located. "Land prices have skyrocketed, and there is only room for very dense projects," she adds.
The Southgate Market, for example, is a multi-level development on the Roosevelt corridor. The Market, located two blocks west of the Target store, will be a five-level structure with more than 300,000 sf of gross leasable area spanning an entire city block. Southgate Market will house 15 retailers, including Linens 'n Things, Office Depot, a Bank of America branch and discount shoe retailer DSW. The mall will include parking for 1,100 cars. Whole Foods also recently announced its participation in the development with a 55,000-sf store.
Of 65,000 sf of retail space at State Place, the site formerly occupied by the Chicago Police Department headquarters, more than 55,000 sf is now leased to a range of retail tenants. Northern Realty Group Ltd. most recently signed five leases to the property, bringing State Place at 1103 S. State St.'s retail space to 85% leased. Newly inked tenants include: Coldwell Banker Residential Real Estate Inc., 4,043 sf; Verizon Wireless, 1,778 sf; Infinity Physical Therapy, 1,692 sf; H&R Block 1,551 sf; and Hair Cuttery, 1,287. The other retail tenants at State Place include Walgreens, Fitplex and Charter One Bank.
"The South Loop is running two parallel paths," says Michael Shields, principal with Northern Realty. "Because of the access, it is a destination onto itself. Chicago has major expressway arteries along the South Loop, so it is a logical start for big-box users to draw from a wide trade area. Secondly, the South Loop is maturing as a residential hub, and as such the residential is running ahead of business and services."
Staples and Home Depot have also announced new developments in the area. Home Depot will build a 132,653-sf store with an additional 96,150-sf building for two floors of garage parking. Yet, even as these retailers announce plans, there is still room for more retailers, says Shields.
"There are still any number of categories to be built, and all those categories need competition," Shields says. "By example, you still have to search for a good place to go to find a bagel, or a good cup of coffee. Those are the most basic of retail, but it's still not readily available."
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