How to Find the Formula for Success in Chicago’s Retail Market
Successful retail development, especially in today’s evolving retail environment, needs constant re-evaluation by developers as well as municipalities. In some cases, the old rules are being rewritten to allow for more creative uses of otherwise stagnant — and sometimes historic — properties.
The city of Chicago’s Industrial Corridor Modernization Initiative, designed to relax zoning in areas once reserved for manufacturing, is an excellent example of a notable shift that will allow developers to execute new strategies for retail development, often in combination with other uses.
The recently adopted guidelines for the North Branch Industrial Corridor, the first of 26 such areas in Chicago to be evaluated, suggest the formula that will be needed to help realize the city’s ambitious vision.
With employers increasingly focused on attracting and retaining talent in a tight labor market, they are seeking locations with a mix of retail amenities that their employees can take advantage of before, during or after the workday. Increasingly, this mix is found in neighborhoods outside the downtown core that offer a relative value when it comes to office rents — another benefit for companies looking to make a move.
In some cases, office and retail are located in the same mixed-use development, a model that’s becoming more common. In 2015, our firm completed NEWCITY, a 565,000-square-foot mixed-use complex in the heart of Lincoln Park and adjacent to the North Branch corridor.
While this enclave of Chicago is best known as a retail district — the second largest in the city behind the Magnificent Mile — it’s emerging as an employment hub as well. In fact, a site just a mile northwest of NEWCITY is one of the proposed sites for Amazon’s HQ2, an announcement that, together with the zoning changes, has spurred significant interest from forward-looking office developers.
The expected influx of office workers will not only support existing retail in this area, but also drive the need for additional options. Given this synergistic relationship between the two sectors, it’s no surprise that office developers are starting to think more like retail developers, and retailers themselves, in terms of how they’re planning and marketing projects. After all, they’re catering largely to the same end user: millennials.
Successful office development, like retail development, boils down to location. Amazon, Google and McDonald’s are among the employers that have realized the value of a non-CBD address. Instead, they’re following retailers and residential development to “hip” neighborhoods that resonate with this new generation of workers and shoppers. This has given them a competitive edge in attracting the millennial workforce by creating new urban experiences that combine neighborhood authenticity with downtown conveniences.
Filling demand for housing
The demand for housing naturally increases as high-paying tech jobs move to former manufacturing districts around Chicago. Forecasts for residential development in the North Branch Industrial Corridor indicate the possibility of 7,500 new units coming to the stretch between Kinzie and Fullerton streets.
I predict the area will see upwards of 10,000 units coming on line in the next 10 years simply based on the number of large development sites, such as the former A. Finkl & Sons steel plant, Greyhound maintenance facility on Goose Island and a 30-acre parcel that includes the Chicago Tribune’s Freedom Center printing plant in River West.
As this enclave of Lincoln Park evolves to include a full spectrum of live-work-play options, retail of all forms stands to benefit. Those who live here will grab their morning coffee here, go out for lunch or dinner here and shop for daily needs here. This economic ripple effect is sure to bring additional concepts to the area, including those that thrive during evenings and weekends due to the built-in customer base. This will further position this stretch of Lincoln Park as one of Chicago’s top retail districts.
Perfecting the timing
Timing is critical when it comes to real estate development. Since the new land-use guidelines were adopted last summer, several projects have been announced, including everything from an all-timber office building on Goose Island to a new stadium in the Lincoln Yards mixed-use district that would host concerts and sporting events. But developers, particularly those who are accustomed to navigating the sometimes-turbulent retail waters, will still have to reconcile the land-use opportunities with the needs of the retailers themselves.
Because of how recently it was completed, NEWCITY serves as a case study in retail and entertainment concepts that are not just surviving, but thriving in the current landscape — and in Lincoln Park in particular. In addition to a grocery component, the center offers services, merchandise and experiences that cannot be easily replicated online. Examples include a kitchen showroom where customers can meet face-to-face with design experts, an off-price retailer that offers a rotating selection of discounted apparel and accessories and entertainment-focused concepts including a movie theater and bowling alley.
Although the future of the North Branch corridor is still coming into focus, one thing is clear: its successful redevelopment hinges on many factors, including the thoughtful combination of uses that complement each other as well as offerings in neighboring communities. And despite the headlines about the so-called retail apocalypse, it’s also apparent that a vibrant mix of storefronts, restaurants and entertainment concepts will be crucial to “selling” this location to both employers and the people who will fill their offices.
— By Jeff Berta, Senior Director of Real Estate Development, Structured Development. This article first appeared in the February 2018 issue of Heartland Real Estate Business magazine.