Economic Incentives Combat Problem of ‘Grocery Deserts’ in South Suburban Chicago

by Kristin Harlow

At a time when the development of new retail power centers across metro Chicago has been at a record low since chain store proliferation first started back in the early 1980s, south suburban Cook County has suddenly seen a turnaround with the addition of two new freestanding Walmart stores and one new Meijer store.

These three openings occurred within months of each other in 2016 and represent approximately 560,000 square feet of the 1.36 million square feet of new retail construction that opened across the greater Chicago market last year.

Andy Bulson, Mid-America Real Estate Group

Andy Bulson, Mid-America Real Estate Group

The historical challenges for retailers attempting to operate stores in south suburban Cook County are no secret: out of control property taxes, often double or triple that of locations in DuPage or Will counties; a high sales tax; a shrinking population base; and a shift in retail spending to other markets.

The cumulative effect was the January of 2015 closure of the Lincoln Mall in Matteson, located about 30 miles south of downtown Chicago, and increased retail vacancy rates in the area.

Full-service grocery stores in the Matteson area also have been on the decline following the closure of Jewel, Dominick’s, Cub Foods and Walmart all within five years starting in 2005.

As a result, many of the grocery dollars shifted to smaller operators and full-service stores in surrounding communities and thus created one of the few “grocery deserts” in suburban Chicago.

Incentive-driven relocations

But the strategy for Walmart closing in Matteson and opening new stores in the surrounding villages of Olympia Fields and Richton Park began years earlier as the result of much negotiation with each of the respective villages for financial incentive packages designed to make the projects financially feasible.

Both of the Walmart deals are heavily incentivized and will ultimately help to bring much needed revenue to each of the municipalities as well as fill the grocery sales void for the local residents.

Likewise, Meijer, which opened its new 192,000-square-foot store in June of 2016, reportedly first approached the Village of Flossmoor about a potential site in the mid-2000s and ultimately ended up purchasing the parcel from the Village of Flossmoor, which acquired the land following a foreclosure.

The net result of the Meijer deal is a big win for the Village of Flossmoor, which will collect an additional $750,000 in annual sales tax revenue and an additional $250,000 in annual real estate taxes. The new 192,000-square-foot Meijer store employs nearly 300 people.

Retail on the rise

In addition to the revenue benefits to each of the local municipalities in the form of annual sales and real estate taxes and the convenience of local shoppers, the new Walmart and Meijer stores will prove to be a huge improvement to the retail climate in the immediate area.

In the case of the Olympia Fields location, the 16-acre site was previously a shuttered Currie Motors car dealership that was transformed into a new retail facility. Much of the infrastructure costs were covered by the municipal incentive.

This area of Route 30 from Matteson to Chicago Heights is plagued with a great deal of vacancy and underutilized retail uses, so village officials now hope that a new era of investment will take place following last September’s grand opening of Walmart.

As for the Richton Park location, the site is strategically located at a full interchange of I-57 with vacant land on the other three corners. Again, there is hope that this new 183,000-square-foot Walmart will be a catalyst for additional retail growth in Richton Park.

Following the closing of Safeway and the shuttering of the Dominick’s grocery store chain across Chicago, a wide range of grocers, from Jewel and Mariano’s to Pete’s and Fresh Thyme, have been actively trying to gain market share.

Unfortunately for the communities immediately surrounding the Matteson area, none of these traditional grocers chose to come into this area. Not until the big-box category killers came in with supercenters was the grocery desert finally filled.

-By Andy Bulson, Principal, Director of Suburban Tenant Representation, Mid-America Real Estate Group. This article first appeared in the February 2017 issue of Heartland Real Estate Business magazine.

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