CHICAGO—Safeway's decision to shutter the 72-store Dominick's chain put a shadow over the Chicago metro region's retail market throughout the year. However, the vacancy rate declined and rental rates responded by increasing, according to a year-end report just published by NAI Hiffman. But this progress for the most part has not impressed developers, who have largely remained on the sidelines and say new construction will have to wait until the housing market comes back.
The limited new construction during the year was instrumental in the metropolitan area's high rate of positive net absorption, according to NAI Hiffman. “In 2014, the vacancy rate had dropped from 9.0% to 8.3% by the end of the year; this equates to a net absorption of approximately 6.6-million-square-feet.” Furthermore, citing CoStar, the firm said that the reduction in vacancy pushed the average rental rate from $15.62 to $15.79 or 1.08% over the course of the year.
The impact of the Dominick's shutdown was lessened by other local grocers. Mariano's, now the hottest chain in the region, committed to re-develop thirteen of the vacant locations and absorb more than 845,000-square-feet of space. In addition, Jewel Foods decided to take over four of the sites and absorb about 260,000-square-feet. Whole Foods, Tony's Finer Foods, Caputo's Foods and Cermak Produce all committed to other former Dominick's stores, bringing the grand total absorbed to 2,015,000-square-feet. Still, more than 3,000,000-square-feet of former Dominick's remains.
One of this year's bright spots was the expansion of Art Van Furniture into the metro area. The Warren, MI-based retailer opened new stores in Bedford Park, Batavia, Orland Park, Woodridge, Hobart, IN, and on Elston Ave. in Chicago. This was existing space, but the six stores occupy more than 345,000-square-feet of retail space.
"New shopping center development within the Chicago metropolitan market was limited in 2014 and that shall continue into 2015,” according to NAI Hiffman. “Retail shopping center growth during the mid to late 90's as well as the early 2000's was fueled by the meteoric residential housing growth statistics.” And until residential housing growth kicks in “there is simply no need for new bricks and mortar when overall retail vacancy remains over 5-million-square-feet of space.”
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Brian J. Rogal
Brian J. Rogal is a Chicago-based freelance writer with years of experience as an investigative reporter and editor, most notably at The Chicago Reporter, where he concentrated on housing issues. He also has written extensively on alternative energy and the payments card industry for national trade publications.
