Oakbrook, Terrace, Ill. -- A report released Monday by Mid-America Real Estate Corp. suggested that new shopping center construction in and around Chicago could ramp up significantly after this year.
According to the 2011-12 Chicagoland Shopping Center Report, with a 13.4% decrease in new shopping center GLA in Chicagoland last year, 2011will likely mark the bottom of a four-year decline in retail center construction. After a flat 2012, shopping center development could double in 2013, according to Andy Bulson, author of the report.
In 2011, there were 1.03 million sq. ft. of deliveries in Chicagoland, making it the lowest year for shopping center construction since 1983 when the report began, a record that last year’s report had predicted. That figure trails behind the 1.18 million sq. ft. reported for 2010, which itself represented a 31% decline from 2009.
“At least the decline slowed in 2011,” Bulson said, “but by mid-2012 we’ll finally get to see an end to the decrease.” Approximately 1.09 million sq. ft. in new shopping center development is projected in 2012, with as much as 2.3 million projected for 2013.
The report also revealed that 50% of the GLA in new shopping center development last year was attributed to three Wal-Mart Supercenters opening in the suburbs.
The report suggested that new shopping center growth will be driven by grocery store anchors. “Mariano’s Fresh Market has nearly a dozen stores planned for the coming years,” said Bulson. “Local grocery chains like Mariano’s are becoming extremely active while Supveralu’s Jewel and Safeway’s Dominick’s remain on the sidelines.”
In 2012, three new locally operated grocery stores will open in newly constructed locations, including two Mariano’s stores and one Pete’s Fresh Market.
“Grocery is growing because the consumer with discretionary income is demanding more choices, and the big companies like Supervalu and Safeway are not delivering what they want, and Whole Foods is growing at a slower rate,” Bulson said. “This has created more opportunities for local operators.”
In the City of Chicago, Costco, Target and Mariano’s will likely lead the resurgence of development in 2013 and the coming years,” according to the report, as up to eight new centers could open in the area in 2013.
In the far suburbs of Woodstock and Shorewood, two new Kohl’s department stores are projected to open in a smaller prototype. However, Bulson said, there remains less emphasis on new shopping center construction in these areas as anchors focus on the heavily populated in-fill markets.
“With retailers more cautious than ever, it is natural to see them focusing on areas with greater population densities, which translates to higher sales volumes. Over time, as the in-fill opportunities can no longer meet retailers’ growth plans, the focus may shift back to suburban areas.”
Bulson cautioned that a return to the record-setting levels of 2007 is nowhere in the foreseeable future. “However, a return to a sustainable ‘new normal’ may be possible after 2013,” he said. “This would require consumer confidence to stay strong, pushing retail demand for new stores.”
Even then, he said, it’s likely that retailers will continue to be conservative and stay focused on the fundamentals of real estate site selection, which includes an emphasis on serving densely populated areas.